Thursday, May 13, 2021

What Might Temper Rising Prices: Yesterday's World Agricultural Supply Demand Estimate (WASDE)

From DTN Progressive Farmer:

5/12/2021 | 3:32 PM CDT
USDA Reports Review
New-Crop December Corn Falters on Bearish WASDE; Soybeans Maintain Strong Gains

While the May USDA World Agricultural Supply and Demand Estimates (WASDE) report featured little earth-shattering news for soybeans, it was new-crop December corn futures that reacted in a dramatically bearish fashion after new-crop stocks and demand estimates were more bearish than traders had anticipated. Overall, the crop report was fairly neutral for soybeans and bearish for both wheat and corn.


Corn ending stocks for the current 2020-21 crop year were dropped by 95 million bushels (mb) to 1.257 billion bushels (bb), about as expected. Old-crop corn exports were increased by 100 mb to 2.775 bb. The surprise came in the new-crop slot. Using the same acreage as in March planting intentions and a yield of 179.5 bushels per acre (bpa), corn production is estimated at 14.990 bb. That was just slightly below the average trade estimate of 15.07 bb and up 808 mb from last year. Inexplicably, USDA chose to drop U.S. corn exports by 325 mb from the revised old-crop number to just 2.450 bb. That comes despite the rapid decline of the Brazilian safrinha corn crop due to expanding drought. Ethanol usage was raised by 225 mb as the country recovers from COVID-19, but the fall in demand resulted in a new-crop carryout of 1.507 bb, or 153 mb higher than what was expected. The average farm price is projected to be $5.70 versus $4.35 this past year.

Globally, as mentioned, the Brazilian corn crop is wilting under current hot and dry conditions, and USDA chose to drop Brazilian corn production by 7 million metric tons (mmt) to 102 mmt (4.02 bb). That is still higher than most private analysts, leading traders to scratch their heads about dropping U.S. corn export demand in light of Brazil's reduced supplies and China's voracious appetite. Argentine corn production was left untouched at 47 mmt (1.85 bb). China corn imports were raised to 26 mmt for the 2020-21 year and kept at that same 26 mmt for 2021-22, further solidifying the demand base. World corn ending stocks rose by 8.8 mmt to a higher-than-expected 292.3 mmt (11.5 bb), with Argentine corn forecast 4 mmt higher at 51 mmt and Brazilian corn production forecast to be 16 mmt higher at 118 mmt (4.65 bb) -- all speculation at this point. 

The WASDE report was considered bearish for corn, but it is new-crop December that's absorbing much of the selling. No doubt part of the reason is that, following the meteoric rise in corn prices, it is expected that ultimate corn acreage could be well above the March seeding intentions....


Here's the USDA WASDE page but the DTN Progressive Farmer commentary is some of the best out there.