USDA released updated crop production and supply-demand forecasts on Tuesday, Nov. 9, with the former feeding into the latter, which are popularly known as the WASDE (World Agriculture Supply and Demand Estimates) report. The National Agricultural Statistics Service (NASS) folks grabbed a few headlines with their increase in projected U.S. average corn yield (177 bushels per acre) and reduction in expected soybean yield (to 51.2 bpa). With the crops more than 80% harvested, we're now more concerned with the demand side; who wants this stuff we've grown and what will they pay for it?
Let's focus on the export forecasts for corn, soybeans and wheat.
The table below shows the final WASDE export figures for the past two marketing years, the October forecast for this year and the updated November numbers. The past couple years have been volatile, with 2019-20 shipments hobbled by the trade war with China and 2020-21 boosted by President Trump's phase-one trade deal with China and a surge of Chinese purchases. While China is far from being the only export customer, they are the gorilla in the room -- noticed when absent and taking up a lot of room when present.
|WASDE Export Forecasts and Actuals (million bushels)|
|2019/20||2020/21||2021/22 (Oct)||2021/22 (Nov)|
Note that, from the October numbers, USDA was already seeing a slowdown in exports this year because of price rationing. FOB export prices are much higher, and cash average prices are expected to be higher as well. Tuesday, they reduced the forecasts for soybeans and wheat further, taking soybeans down another 40 million bushels (mb) and wheat another 15 mb. For soybeans, the forecast is now down 9.5% from year ago. For wheat, the expected cut is 13.4%. For corn, unchanged Tuesday, the expected year-over-year drop is 9.2%.
But did the folks at the World Agriculture Outlook Board (WAOB) go far enough? Should the export estimates be cut further?
A look at the Foreign Ag Service (FAS) export performance tables shows some potential trouble. Wheat export commitments since June 1 (year to date) were 22% smaller than last year, as of Oct. 28. Soybean export commitments lagged by 33%. Corn export commitments, which include both grain shipped since Sept. 1 and sales on the books but not yet shipped, were 7% below year-ago. So, we see that the Outlook Board noted the big lags in wheat and soybeans and made cuts to their full year forecasts. Expecting the full year corn exports to be down more than they are currently behind, they left corn unchanged Tuesday.
Using a different metric, commitments as a percentage of the full year forecast, soybeans had been 57% when the average is 59%. With the new lower target, sales through Oct. 28 are now 57.9% of the full-year forecast, still light by about 1%. The wheat situation is similar. Tuesday's 15 mb cut in the forecast still leaves total commitments well below the 62% that would typically be seen by the end of October.
Corn would appear to be in excellent shape from this viewpoint as well, with commitments for 49% of the full-year number as of Oct. 28. That compares to the five-year average of 40%.
Why didn't USDA raise the corn export forecast?
It's the recent sales pace. Purchases last spring and summer for 2021-22 marketing-year delivery were strong, with 24.158 million metric tons (mmt) already on the books at the beginning of the marketing year on Sept. 1. China had 11.9 mmt of that total. However, China has bought almost nothing since the first of September, and sales to all destinations since Sept. 1 added up to only 7.588 mmt through Oct. 28. Just like certain football teams we have observed, corn had an early lead, but has been letting the opponent (apathy) back in the game. The folks at the WAOB likely just didn't feel comfortable raising the target when the current pace of sales is so slow.
What clues are we watching to make further changes to the export forecasts?
First of all, we expect very strong weekly soybean export inspections numbers for November through January and declining a little in February. These should run 1.8 mmt to 3 mmt per week in non-holiday weeks. Catchup is needed after Hurricane Ida damaged Gulf export facilities and we lost several weeks of shipping. China did buy a dribble of leftover Brazilian beans for shipment in December through January, as producers down there became confident about 2022 yields, and let go of remaining stocks. These are modest quantities, however, and mostly meant as a warning shot to knock down U.S. prices. It succeeded, with front month futures Tuesday morning hitting the lowest level since the March Grain Stocks report bottom.
We also note that China's Sinograin and COFCO signed frame purchase agreements with at least two multi-nationals at a recent trade show in China. One was reported to be 8.4 mmt. Some of this, if not the majority, is expected to be U.S. origin and should start to show up in the daily or weekly export-sales reports.
For wheat, the U.S. is usually a residual supplier, due to high prices. FOB hard red winter wheat is currently well above other origins, while soft red winter wheat is competitive with French, Russian or Ukrainian grain before freight costs enter the picture. Australian new-crop wheat will start to be available in quantity before year end, but the USDA approach has to be that tightening world stocks (notably among the major exporters) will create an opportunity for more U.S. sales than we've seen to date.
Alan Brugler may be contacted at email@example.com
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