Update for January 12th, 2021
News from the USDA this morning moved prices limit higher. USDA cuts fell below trade estimates for nearly all U.S. numbers, supplies are lower than traders had thought and markets are reacting.
Probably the biggest surprise was in the corn market with the 2020 corn yield falling by 3.8 bushels off from the December estimate. Total U.S. corn production numbers also fell from 14.507 billion bushels in December to 14.182 billion bushels. The U.S. corn carryout also was reduced by 150 million bushels down to 1.552 billion bushels.
U.S. soybean yield was cut by 0.5 bushels per acre to 50.2 bushels per acre. This lowers soybean production by 35 million bushels off the December estimate and was 23 million below trade estimates. This brings U.S. soybean carryout to 140 million bushels, 35 million bushels less than the December report.
Estimates for Brazil’s corn production was one of the few categories that did not see a cut larger than the trade had anticipated. The trade had estimated corn production for Brazil at 107.7 million tons, the USDA came in higher at 109 million tons. USDA estimates for Brazilian soybean production also came in above the trade number at 131.4 million tons. Argentine production was lowered from the December report but was within trade estimates.
January 2021 USDA Supply & Demand, Grain Stocks,
and Winter Wheat Seedings
Jerry Gulke of the Gulke Group says 2021 has “rolled out the red carpet for grain producers.” He pointed out that this particular report is especially significant as it is the first time in 8-9 years that global demand is larger than global supply.
Old crop soybeans are up $2.17 over the past month “That’s about $120 an acre more for that crop in the bin than what it was worth a month ago.” Old crop corn is up $0.70 over the past 30 days and new crop corn is up about $0.30. (All of these amounts were tallied prior to the Jan crop report) According to Gulke, “From an acreage debate standpoint, corn and soybeans are keeping relatively close together. It’s going to make it very difficult for somebody to decide what they’re going to plant because financially it’s pretty close. It is not a matter of which commodity makes more or less; it is now a matter that anything works.”
Supply issues have become a central issue in trade prices and Gulke explained, “That’s due to last year’s U.S. production, problems in South America-as well as yet to be determined production in the United States and Canada. This is all happening while China just keeps on buying.” Currently, nearly 60% of U.S. weekly soybean exports are headed to China.
Last week we learned that Argentina’s government had agreed to end the suspension of corn exports through February and instead placed a daily export limit of 30,000 mt. Reuters reports that according to the Argentine Rural Confederation this proposed compromise has not satisfied farm groups, “This kind of government intervention in the market alters the rules and undermines grower’s confidence, generating uncertainty about next season’s sowing”.
New reports indicate that the Trump administration is planning to grant some of the 32 RFS waivers that are currently pending for the 2019 compliance year. The EPA has not officially responded to this story but a high ranking official within the agency said that the request is being considered and a decision could come as early as this week.
In other ethanol news we have also learned that the U.S. Supreme Court is now expected to review a ruling regarding small refinery biofuel exemptions. Kurt Kovarik, a spokesman for the National Biodiesel Board stated, “We are disappointed in the Supreme Court’s decision to review the case but will continue to vigorously pursue a resolution to the damage that small refinery exemptions due to the biodiesel industry.” Last year a Circuit Court decision ruled that the EPA can only grant SRE’s to those facilities that have received them yearly since 2010, this was a big win for the ethanol industry and any change to this ruling could cause a significant decrease in demand.
Forecasts show normal to below-normal rainfall over Brazil for the next two weeks. For this week through January, 17th key growing regions in Brazil are expected to receive below normal precipitation, Argentina is expecting normal rainfall in most areas during this same period. The longer-term forecast that runs from January 18th -24th shows a drier outlook for Argentina and better rainfall opportunities for Mato Grosso and other key soybean regions in Brazil.
Brazil weather maps.
Argentina weather maps.
There has been some talk that the Polar Vortex that has avoided the U.S. so far this winter season but is currently bringing Arctic cold temps to China, Russia and Europe may be splitting apart.
The first map below shows the extremely cold regions where the Polar Vortex is positioned. The U.S. is trending 2.3F colder than a year ago and very dry with 62% less rainfall than a year ago. Snowfall across the country is trending 70% lower than last year and the least in 35 years.
The second map shows the outlook for this week January 11th-17th. This continues to support the outlook for increasing drought conditions for much of the western U.S. as we will see the driest conditions in 8 years.
The last map gives the outlook for next week, January 18th-24th. Very warm temps are expected to begin the period with colder weather expected to move in later in the period. As the colder air invades more snowfall is expected to fall across the Upper Midwest, Great Lakes and interior Northeast. All these forecasts show a common moderate La Niña/PDO signature.