Update for April 16, 2021
Spring planting season 2021 is starting out dry and cold, slowing progress. While not ideal, it’s early so right now the trade is not worried. At this point in time the trade is more concerned with the overall Chinese demand and the health of our political relationship with China along with the dry conditions impacting the 2nd season corn crop in parts of Brazil. If the situation does not improve soon, it’s likely the Safrinha production numbers will need to be trimmed more aggressively and export demand will transfer to the U.S. In fact, there has already been some talk of additional Chinese buying of U.S. corn due to the uncertainty surrounding the actual crop size in both Brazil and Argentina. These potential adjustments in the U.S. balance sheet would add substantial importance to any weather complications and yield drag during the 2021 season.
POET vice president of corporate affairs Doug Berven says that the huge slide in ethanol use that resulted from the Covid pandemic is ending. 1 year ago, 50% of travel was shut down, “Which means that about half of the ethanol industry shut down, and that had a lot of ripple effects around the world. People don’t realize that the ethanol industry provides a tremendous amount of human-grade CO2.” “So, the ripple effects of the ethanol industry were realized to a great degree this past year. Luckily now we’re back at about somewhere between 90 and 95% of what normal driving conditions are.” Berven told Brownfield Ag that while margins aren’t great the ethanol industry is doing fine and he is very optimistic looking ahead. If the demand for oil continues to increase as the economy reopens and recover’s we will also see estimates for ethanol demand increase as well. Weekly ethanol output numbers this week were lower than expected bringing ethanol stocks to their lowest seasonal level in 7 years.
Ethanol production in Brazil is in the process of changing. Currently about 9% of the ethanol produced in country is made from corn but Reuters reports that the industry is making some significant changes. Most facilities that have typically used sugarcane in the past to produce ethanol have now made the necessary conversions to their plants to process corn instead and have signed long-term contracts for corn.
Disappointing weekly soybean and meal export sales and NOPA crush numbers were announced yesterday. At this time most meal is being sourced out of Argentina and soybeans from Brazil. Not a huge concern since exports have already met the USDA’s estimate for the entire trade year. Some analysts feel that with the tightened supply we need nothing less than 90 million soybean acres to meet current and upcoming demand, 2.4 million acres more than the USDA’s highest estimate. With the price of corn pushing higher it’s hard to believe the market is “buying” any additional soybean acres.
Soybean imports to China surged in March as many ships were finally cleared to unload. Xie Huilan, an analyst with an agriculture consultancy CoFeed reported, “Soybean arrivals in Jan-Feb were lower than market expectation due to cargo delay. Some shipments delayed earlier later cleared customs. More than 5 million metric tons of U.S. soybeans were loaded in January for shipment to China, some of which arrived in March.” Imports of corn for the first quarter were significantly higher, up +437.8% from last year.
The USDA statistics division is planning to review the methodology used to gather information for the Quarterly Grain Stocks reports. During an online conference one official from the agency explained that they will be conducting a “deep dive” into the reports. Over the past few years there have been large changes made to previous stocks numbers months after the fact which has misled the market and, in many cases, caused farmers to doubt the accuracy of the information within the reports.
Drought concerns remain for those in the Plains and a few areas of the Corn Belt. USDA said this week that 75% of the U.S. spring wheat crop is in areas of varying drought conditions. They also report that 17% of U.S. corn acres and 15% of U.S. soybean acres are in problematic areas. The 3 maps below show the regions of concern.
NOAA’s temp and precipitation outlooks for April 21-25 are shown here. There appears to be no significant warm up for at least the next 10 days.
The following map shows the expected precipitation totals for the U.S. for the next 2 weeks which runs through April 29th