WASHINGTON — A bevy of key US Department of Agriculture reports contained bullish data that sent nearby corn, soybean and wheat futures to fresh sixyear highs last week. Most of the USDA production and stocks data were below the average of trade expectations and signaled tighter domestic supplies of all three major commodities.
Corn and soybeans jockeyed for the most bullish data. Although the 2021 soybean carryover forecast was the lowest in seven years, corn won the “contest” with a revised 2020 production estimate that fell below even the lowest trade estimate.
Nearby corn futures months surged 5% to the 25¢-a-bu daily trading limit following the 11 a.m. Central Standard Time reports on Jan. 12, while soybean futures jumped about 45¢ a bu, or more than 3%. Nearby Kansas City and Chicago winter wheat futures were up about 30¢ a bu for the day, and Minneapolis spring wheat futures gained about 15¢. Nearby futures were the highest since 2014.
The USDA raised from December and from 2019-20 its forecasts for cash prices paid to farmers in 2020-21 for all three commodities, with soybeans at $11.15 a bu, up 60¢ from December and up $2.58, or 30%, from last year; corn at $4.20 a bu, up 20¢ and 64¢, respectively; and all wheat at $4.85 a bu, up 15¢ and 27¢, respectively.
Farmers are expected to respond to the sharply higher prices for soybeans with increased plantings in 2021, with corn prices needing to keep pace to ensure adequate plantings for supply in 2021-22.
The USDA forecast 2020 corn production at 14,182 million bus, up 4% from 2019 but down 2.2% from the most recent estimate in November based on lower average yield at 172 bus per acre, down 3.8 bus from November, and harvested area at 82,467,000 acres, down 60,000 acres. Trade expectations as reported by Reuters ranged from 14,319 million to 14,997 million bus and averaged 14,470 million. Though still the fifth largest crop on record, the estimate is down nearly 1,100 million bus, or 7%, from the initial USDA forecast in August of 15,278 million bus, which would have topped the 2016 record of 15,148 million bus.
A 400-million-bu drop in total supply (lower production coupled with lower beginning stocks) resulted in lower USDA forecasts for exports and for domestic use of corn for feed and ethanol in 2020-21, but forecast carryover on Sept. 1, 2021, still was lowered from December by 150 million bus, or 9%, to 1,552 million bus.
The tight situation in soybean supplies has been known for some time but was forecast to tighten even further. Soybean production in 2020 was lowered by 35 million bus from November to 4,135 million bus (still the fourth highest on record), with carryover on Sept. 1, 2021, lowered by the same amount as changes in other categories tended to offset (despite a 5-million-bu increase in domestic crush at a record 2,200 million bus and a 30-million-bu increase in exports at a record 2,230 million bus). At 140 million bus, the US soybean carryover would equate to less than a two-week supply for the market and the lowest since 92 million bus in 2014.
The situation for soybeans is made more severe by ongoing strong demand from China at a time when supplies from top exporter Brazil have been reduced by adverse weather. Brazil’s 2020-21 soybean exports were forecast at 85 million tonnes, unchanged from December but down 8% from 2019-20, while US exports forecast at 60.69 million tonnes are up 33%.
Meanwhile, amid record-high corn prices in China, the agriculture ministry last week raised from December its forecasts for 2020-21 imports of corn by 43% and for soybeans by 3.2% as it seeks to feed rapidly expanding livestock herds.
Wheat futures have tended to be a follower of corn and soybeans in recent months, although a more bullish scenario has developed recently because of export taxes and limits in top exporter Russia that go into effect Feb. 15. Further, winter wheat already is planted (US area up 5% from last year’s record low plantings) so the tussle with corn and soybeans for acres may be in spring wheat. Carryover of US wheat on June 1, 2021, was forecast at 836 million bus, down 3% from December on an increase in projected feed and residual use.