USDA Worksheet and the Battle For Acres
Update for February 9th, 2021
The February USDA report was not as friendly as traders had expected with conservative usage and carryover estimates. Corn demand numbers were the most surprising to the trade considering the significant uptick in Chinese purchases of corn and ethanol in recent weeks. In addition, the USDA had just reported 62.1 million bushels of U.S. corn was shipped last week, a high for the marketing year and almost two times that of the prior year. Overall shipments are up by 85% on the marketing year, and the rate is expected to increase as soybean exports slow during the next few weeks. Today’s report left U.S. ethanol production unchanged and increased corn exports by 50 million bushels-90 million less than traders had expected.
Last week soybean inspections were down slightly from the previous week but were still near the upper end of the trade range of 66.2 million bushels. Soybean carryout came in slightly below trade estimates at 120 million bushels. Usage was slightly adjusted and exports were increased by 20 million bushels.
For both corn and soybeans, the top destination for export shipments was China.
Source: USDA, Reuters, StoneX
There are rumors that the Chinese may continue to import U.S. soybeans well into late winter/early spring which is typically when Brazilian soybeans take over the export market. It’s unclear exactly why China may be looking to the U.S. during this time-frame but some believe it may have to do with the unreliability of South American shipments. There is also uncertainty about adequate supply which may limit available exports from S.A, this has analysts suggesting that that this may also bring the Chinese back to the U.S. market earlier than normal this year.
The acreage battle for the 2021 planting season is underway and a number of factors are driving the decisions many producers are making which is complicating acreage estimates. Some producers decide at harvest what crop will be planted on each field but others wait and gage some of their decisions on market action. Here are a few of the details swaying decisions this season:
Soybean’s had the price advantage just a few weeks ago, pure and simple profitability is the bottom line but that has changed recently. But we are also discovering just how few bushels there are in the world and demand is strong. Another very important point to keep in mind is that soybean insurance levels are currently $2.30 per bushel higher than a year ago.
New crop corn prices have rallied to +$4.50 per bushel and now some in the trade are forecasting 2021 corn acreage of 94-95 million acres. This is a considerable jump over the past 3 seasons when the U.S. has raised 89-91 million acres. If this occurs will prices hold? On the other hand, insurance prices are over $0.60 higher than a year ago.
In past years when we’ve had attractive pre-season prices some producers have made the decision to change to the more profitable option. Earlier there had been some speculation that soybean prices were attracting some cotton producers in the South. Since then, just like corn, cotton prices have improved closing the gap and now the roll over is less certain.
Producers of some “specialty crops” that had better profit margins in the past are now considering making the switch to more traditional crops now that the margins have narrowed.
Year 1 of the China Phase One agreement is in the books. USDA has reported that China purchased $28.75 billion in U.S. agriculture goods last year but fell short of the $36.5 billion commitment. Regardless, China almost matched their previous record of $29 billion set in 2013. Now we begin our second year of the agreement with a new administration and there doesn’t seem to be anyone that knows what implications this may mean for trade. Shown below are a series of charts complied and produced by the Peterson Institute for International Economics. These illustrate the agriculture trade results from the first year.
Source: US Census, PIIE
U.S. exports of corn and pork were the leaders by a large margin.
Source: US Census, PIIE
The Arctic air arrived late last week tumbling temps to levels well below normal across the Midwest and Plains. This surge of frigid air is now expected to linger for most of the month of February.
The forecast for Wednesday through Saturday calls for the chance of occasional snow producing disturbances but no storms are forecast for the period. Predicting exact timing and placement for these types of snow events is difficult but the EURO and GFS models are included below to give you an idea of what to expect in the coming days.