On Tuesday, Oct. 12, USDA is expected to release higher ending stocks estimates of U.S. corn and soybeans for 2021-22, revised production estimates for 2020 and lower estimates of U.S. ending wheat stocks. Traders have already reacted to the changes stemming from USDA's Sept. 30 reports, but may find another surprise or two Tuesday.
The unusual thing about USDA's October World Agricultural Supply and Demand Estimates (WASDE) report is that we already have strong hints of what lies ahead thanks to USDA announcing 1.236 billion bushels (bb) of corn stocks on hand as of Sept. 1, a higher-than-expected ending stocks figure for 2020-21. The Sept. 30 Grain Stocks report also noted USDA revised its estimate of 2020 corn production 71.0 million bushels (mb) lower to 14.111 bb.
The combination of lower production in 2020 but higher ending stocks are not adjustments we would normally expect, and it will be interesting to see how USDA's old-crop estimates change to explain the new numbers. A 125 mb reduction in the feed and residual account is the most likely explanation, but we will see what USDA says.
For the new-crop season, USDA's new-crop estimate will get plenty of attention and so will some demand items. Dow Jones' survey of analysts expects USDA to keep its corn crop estimate near 15.0 bb. More specifically, the survey estimates a slightly lower corn crop of 14.948 bb based on a yield of 175.9 bushels per acre and 85.0 million harvested acres. Ending corn stocks are expected to increase from 1.408 bb in September to 1.421 bb in October.
Since the September WASDE report, USDA surprised markets, reporting the inventory of U.S. hogs and pigs fell to 75.4 million head as of Sept. 1, 4% lower than a year ago. Given the lower inventory, a modest reduction in corn's feed demand estimate is likely Tuesday.
The larger demand concern is for corn exports. USDA's export estimate of 2.475 bb is looking suspiciously high with numerous shipping problems keeping transportation costs high late in 2021. Also, damage from Hurricane Ida to grain terminals along the Mississippi River in late August put U.S. corn shipments in an early hole, down 32% at the end of September from a year ago.
From a world perspective, South American corn crops are just getting planted and have a long way to go until the next harvest. On Thursday, Oct. 7, Brazil's crop agency, Conab, estimated Brazil's 2021-22 corn crop at a record-high 116.3 million metric tons (mmt) or 4.58 bb.
Dow Jones' survey expects USDA to slightly increase its estimate of world ending corn stocks from 297.6 mmt to 298.4 mmt (11.75 bb). Unfortunately, the world corn estimate is distorted by an unrealistically high corn stocks estimate of 207.17 mmt (8.16 bb) for China. Among the world's top four exporters of corn, ending supplies are estimated at a total of 1.89 bb, the second-lowest surplus in nine years.
After USDA reported 256 mb of Sept. 1 soybean stocks in its Sept. 30 report, Tuesday's WASDE will show more bearish ramifications in the 2021-22 season. As USDA explained on Sept. 30, the higher ending stocks estimate for 2020-21 will largely be explained by an 81 mb increase in the soybean production estimate for 2020.
Of course, not only will old-crop ending stocks be higher, but the unexpected increase will also show up as an 81 mb increase in beginning soybean supplies for 2021-22. In addition, Dow Jones' survey expects USDA to also increase the soybean production estimate for 2021, from 4.374 bb to 4.409 bb, based on a higher yield of 51.1 bushels per acre.
With higher old-crop ending stocks and a higher 2021 soybean production estimate, Dow Jones' survey expects USDA to increase its ending U.S. soybean stocks estimate for 2021-22 from 185 mb in September to 289 mb in October. It may only be a 104 mb adjustment, but it gives soybean supplies much more breathing room in the new season and eases bullish concerns.
Similar to corn, USDA's 2.090 bb soybean export estimate may be difficult to live up to the next 11 months given all the post-pandemic transportation hurdles. China's purchases will be the big wildcard again. Judging by the high price of soybeans in China, it looks like another year of record purchases is possible, but so far, China's actual purchases of U.S. soybeans in the first month of the new season are down 32% from a year ago.
Dow Jones' survey expects USDA to increase its estimate of world soybean stocks in 2021-22 from 98.9 mmt to 101.0 mmt (3.71 bb), but keep in mind that USDA's South American estimates are taken in the middle of their seasons, not at the end. In September, USDA estimated Brazil will export 3.01 bb of soybeans and end the current season with 130 mb on Jan. 31, 2022. Argentina is expected to end its current season with 302 mb on March 31, 2022.
Wheat is the one crop that is almost certain to show bullish adjustments in Tuesday's WASDE report. On Sept. 30, USDA reported 1.78 bb of wheat in the U.S. as of Sept. 1, less than was expected and the lowest Sept. 1 supply total in over 12 years. USDA's Small Grains Annual Summary also reduced USDA's estimate for U.S. wheat production from 1.697 bb to 1.65 bb with reductions coming from both winter and other spring wheat categories.
Dow Jones' survey expects USDA to lower its estimate of U.S. ending wheat stocks from 615 mb to 581 mb in 2021-22. If the survey is correct, it would be the lowest ending wheat stocks in 14 years, a strong argument supporting spot KC wheat prices currently trading near their highest level in over seven years.
Among wheat classes, the tightest U.S. supply situation in 2021-22 is in spring wheat. Traders will especially watch for USDA's estimate of hard red spring (HRS) ending wheat stocks in Tuesday's report, now set at 111 mb and already the lowest in 14 years.
Dow Jones' survey expects USDA to lower its estimate of 2021-22 world ending wheat stocks from 283.2 mmt to 280.9 mmt (10.32 bb), the lowest in five years, if true. More importantly, USDA currently estimates 1.95 bb of ending wheat stocks at the world's top eight exporters, the lowest in nine years and another wheat total that should be reduced Tuesday.
Join DTN's webinar at noon CDT Tuesday, Oct. 12, as I explain USDA's latest estimates and what they mean for market prices. I'm also glad to answer any questions and DTN offers a rebroadcast link for your listening convenience. Register here for Tuesday's WASDE report webinar: https://ag.dtn.com/…
|U.S. PRODUCTION (Million Bushels) 2021-22|
|U.S. AVERAGE YIELD (Bushels Per Acre) 2021-22 (WASDE)|
|U.S. HARVESTED ACRES (Million Acres) 2021-22|
|U.S. ENDING STOCKS (Million Bushels) 2021-22|
|WORLD ENDING STOCKS (Million metric tons) 2020-21|
|WORLD ENDING STOCKS (million metric tons) 2021-22|
Todd Hultman can be reached at email@example.com
Follow Todd Hultman on Twitter @ToddHultman1
(c) Copyright 2021 DTN, LLC. All rights reserved.