USDA Reports Preview

In the Tuesday, Feb. 9, World Agricultural Supply and Demand Estimates (WASDE) report, commodity traders will mainly be watching for USDA's new estimates of U.S. corn and soybean ending stocks, but South American crop estimates will also be of interest.

Below is a more in-depth look at what we're expecting on Tuesday.

CORN

Just two weeks ago, USDA announced 230 million bushels (mb) of corn export sales to China, and the CEO of Archer Daniels Midland mentioned China purchased 200 million gallons of U.S. ethanol for the first half of 2021. Add in a few other recent corn sales, and the demand outlook for corn has taken another big step forward since last month's WASDE report.

Dow Jones' pre-report survey of analysts expects USDA to lower its estimate of U.S. ending corn stocks from 1.552 billion bushels (bb) to 1.363 bb or roughly 9% of annual use. There is room for the estimate to go lower as U.S. corn export commitments currently stand at 2.31 bb or 91% of USDA's 2.55 bb export estimate.

Since Sept. 1, U.S. ethanol production has averaged 943,800 barrels per day, which is on pace for 5.167 bb of corn use if that holds in 2020-21. With corn prices above $5, some slowdown in ethanol production is likely, but USDA's current estimate of 4.950 bb looks 100 mb too low.

USDA's estimate of world ending corn stocks remains overinflated with 7.55 bb marked for China. Just recently, the Food and Agriculture Organization of the United Nations (FAO) lowered its estimate of China's corn surplus to 5.24 bb, based on China's active import purchases and high domestic prices. Without a credible inventory report, even FAO's estimate is just a shot in the dark and is probably still too high. One of these days, USDA might lower its own guess.

For now, Dow Jones' survey expects USDA to lower its estimate of world ending corn stocks from 283.83 million metric tons (mmt) to 280.0 mmt -- a little less than the 189 mb reduction expected for U.S. ending corn stocks. Analysts expect USDA to slightly reduce its estimate of Brazil's corn crop to 108.7 mmt, or 4.28 bb, still well above the CONAB estimate of 102.3 mmt for 2020-21. A slightly lower estimate of 47.7 mmt, or 1.88 bb, is expected for Argentina's crop estimate.

SOYBEANS

According to Dow Jones, USDA is expected to lower its estimate of U.S. ending soybean stocks from 140 mb to 119 mb or less than 3% of annual use. If true, USDA continues to describe the tightest supply situation for soybeans since 2013-14.

Actual supplies may be even tighter, as USDA has been dragging its feet where export sales are concerned. U.S. soybean export commitments to date total 2.155 bb or 97% of USDA's 2.230 bb export estimate for 2020-21. Cancellations are not likely to be a problem this year as China has already shipped 92% of its known U.S. purchases.

Soybean crush demand is another category that has room to go higher. According to the National Agricultural Statistics Service (NASS), U.S. soybean crush demand is up 6% in the first four months of 2020-21. Judging by March futures prices, the incentive to crush soybeans has fallen to its lowest level in seven years, so there may be a slowing in the crush pace ahead.

It's widely assumed that USDA won't want to take ending stocks too low, so we also need to keep an eye on the import estimate. USDA raised the import estimate from 15 mb to 35 mb in January, and another increase in February -- if USDA sees fit -- would be another sign of how tight soybean supplies are getting.

Dow Jones' survey expects USDA to slightly reduce its estimate of world soybean stocks from 84.31 mmt to 83.30 mmt. Analysts expect a slight reduction in southern crop estimates, to 132.7 mmt, or 4.88 bb, for Brazil and to 47.7 mmt, or 1.75 bb, for Argentina.

WHEAT

February is typically a quiet time of year for wheat, and that is largely true thus far again this year, even while corn and soybeans are in high demand. Analysts in Dow Jones' survey expect a small reduction in USDA's estimate of world ending wheat stocks, from 313.19 mmt to 312.60 mmt, or 11.49 bb.

Similar to the situation in USDA's world corn estimates, USDA's estimates of wheat supplies in China and Russia are probably too high given the rising domestic prices that both countries are dealing with, and Tuesday's report is not expected to change that. It will be interesting to see if USDA makes any changes to Russia's wheat export estimates in light of the export taxes recently announced by the Russian government.

Dow Jones' survey expects U.S. ending wheat stocks to slip from 836 mb to 834 mb. If there is a surprise, it will likely show up as an increase in the feed demand estimate, linked to $5 corn.

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The reasonable expectation is that Tuesday's WASDE report, like most February reports, probably won't have much impact on market prices. However, a surprise is always possible, and DTN will be ready to report on whatever happens. Join our webinar at noon CST Tuesday, and I'll explain the numbers of the day, what they mean for prices and talk about the latest market clues.

Register for Tuesday's webinar at: https://dtn.webex.com/…

WORLD PRODUCTION (million metric tons) 2020-21
	Feb	Avg	High	Low	Jan
CORN
Argentina		47.2	47.5	46.5	47.5
Brazil		108.7	110.2	108.0	109.0
SOYBEANS
Argentina		47.7	48.5	46.0	48.0
Brazil		132.7	133.5	132.0	133.0
U.S. ENDING STOCKS (Million Bushels) 2020-21
	Feb	Average	High	Low	Jan	2019-20
Corn		1,363	1,502	1,108	1,552	1,919
Soybeans		119	140	102	140	525
Wheat		834	877	807	836	1,028
WORLD ENDING STOCKS (million metric tons) 2020-21
	Feb	Avg.	High	Low	Jan	2019-20
Corn		280.0	282.7	275.6	283.8	303
Soybeans		83.3	84.1	81.8	84.3	95
Wheat		312.6	314.0	310.0	313.2	300

Todd Hultman can be reached at todd.hultman@dtn.com

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