Fundamentally Speaking

There will be a lot of interest in next month's USDA World Agricultural Supply-Demand Estimate (WASDE) report not only to see if the USDA continues with its stair step approach to increasing the 2020/21 U.S. corn export projection, but it will also give the trade the government's first take on the 2021/22 U.S. and global balance sheets for the major crops.

Based on the lowest beginning stocks in years and much lower 2021 planted acreage than expected as indicated by the end of March prospective planting figures, the USDA will no doubt post some of the lowest corn and soybean stock to use ratios ever seen for their first estimate of the new crop situation so the question is how low.

This graphic shows the USDA May old crop U.S. corn and soybean ratios and their first new crop stocks-to-use estimates with corn in blue and soybeans in orange.

We do not know what the USDA will do with old crop ratios, but we assume they stay the same at 9.2% for corn and 2.6% for soybeans.

For corn one could make a case the ratio goes down if exports are increased, but a 9.2% old crop ratio would be the lowest for corn since the 2014/15 season, the end of a four year stretch where the May WASDE stock to use ratio averaged 6.8%.

As for new crop, the USDA 2021/22 corn ratio from their February Ag Outlook session was pegged at 10.3% but that assumed planted acres at 92.0 million vs. the 91.1 million intentions figure that the USDA will use next month, and beginning stocks were seen at 1.552 billion bushels (bb) which is 200 million bushels (mb) higher than what the situation is right now.

A review of the USDA's first new crop corn stock to use ratios over the past 30 years shows lows of 6.7% in May 2011, 6.0% in May 2008 and 7.1% back in May 2004 so it is unlikely that next month's figure will be that low, but certainly will be lowest since May of 2011 and down substantially from the initial USDA estimate for this marketing year which came in at 22.4%, the third highest since 1991.

For soybeans it appears the USDA will not have any choice except to post the lowest initial new crop soybean stock to use ratio ever.

Consider the current old crop ratio of 2.6% is likely to stay the same next month and if so, like the April WASDE last week, it will be the lowest May old crop stock to use ratio ever.

As for new crop, the USDA 2021/22 soybean ratio from their February Ag Outlook session was pegged at 3.2% which already would be the lowest initial new crop U.S. soybean stocks-to-use ratio ever, but that assumed planted acres at 90.0 million vs. the 87.6 million intentions figure that the USDA will use next month as beginning stocks are still seen at 120 mb.

Bottom line is we see USDA posting lowest initial new crop corn stock to use ratio lowest in 10 years and that for beans the lowest ever.

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