March 2024 USDA Supply & Demand

USDA reduced world crop surplus.

Source: USDA, Reuters, StoneX

US 2023-24 grain carryout was left unchanged from last month except for a slight increase in wheat. As we’ve outlined in recent webinars, the USDA has not changed supply demand tables hardly at all since we began receiving them in May.

World carryout was reduced for each of the three crops we follow. In each case, production was slightly smaller and consumption was increased, thereby decreasing carryout. The USDA is still using a bigger corn and bean production estimates for South America than most of the private estimates, so these stock estimates will likely be reduced next month.

Twenty minutes after the report was released, corn, beans, and wheat were all sitting near their respective highs for the day. Corn moved solidly above the green line 20-day moving average. Look for a Sell Signal on Monday.

We have been waiting for this corn Sell Signal but hate the price level. Keep your sales small on Monday. If you need to generate cash, make sales. If you want to dribble out a few bushels of new crop that is OK too. We will be more willing sellers on the Sell Signal following this one.

February 2024 USDA Supply & Demand

The February USDA reports released Thursday was expected to be largely neutral, and the futures market’s immediate reaction appeared to confirm the predictions.

The ripple effect of the USDA’s bearish forecast on Brazilian soybeans in comparison to Conab’s more-aggressive cuts left futures stuck in place for a while as analysts weighed the ripple effect on U.S. exports and ending stocks.  Wheat futures quickly lost a dime or more while corn was little changed as well at midday.

Corn: U.S. ending stocks were increased to 2.172 billion bushels (bbu) based on lower domestic use while global production was reduced on declines in Brazil and Mexico. Foreign The average price projection was unchanged at $4.80 per bushel.

Soybeans: Slower exports cut the export forecast for the year by 35 MMT from January, leading to a new total of 1.72 bbu. Ending stocks were raised to 315 million bushels as the crush forecast remained unchanged, trimming the average price to $12.65 per bushel.

Wheat: U.S. wheat supplies for 2023-24 were projected at stable with exports little changed at 725 mbu. Ending stocks were raised to 658 mbu with prices unchanged at $7.20 per bushel. The global supply was increased while ending stocks were trimmed to 259.5 million metric tons (MMT), the lowest since the 2015-16 year.

South America’s 2023-24 production estimates were within expectations and not significantly changed from last month’s USDA projections. Brazil’s soybeans slipped to 156 MMT from 157 MMT. Corn was lowered from 127 MMT in January to 124 MMT, which was nary equal to the average estimates. Earlier in the day, Brazil’s Conab lowered its soybean projection to 149.4 MMT; the corn crop was cut 113.7 MMT and the outlook for the safrinha crop’ outlook was trimmed to 88.1 MMT. Projections for Argentina were unchanged from January and even with analysts’ predictions.

Source: USDA, Reuters, StoneX

January USDA Supply/Demand, Grain Stocks, & Winter Wheat Seedings

The USDA released six separate reports today at 11 am central time. You can see our table summarizing the key data below. We will digest this information today and over the long weekend to provide a fuller summary in our next letter on Tuesday next week (Monday is the MLK holiday).

Here are some quick bullet point highlights:

2023 US Production increased. US carryout increased.

In the annual Crop Production report, the USDA updated their final US 2023 crop estimates for corn and soybeans. While the USDA lowered their acreage totals for US corn and beans, they increased their yield estimates for both, which led to larger production totals and larger carryout estimates.

US 2023 Corn yield increased from 174.9 to 177.3 bpa.

US 2023 Corn production increased from 15.234 to 15.342 billion bushels.

US 2023 Soybean yield increased from 49.9 to 50.6 bpa.

US 2023 Soybean production increased from 4.129 to 4.165 billion bushels.

US carryout increased for corn (+31 million bu) and beans (+35 million bu) but was lowered slightly for wheat (-11 million bu).

From the US Supply & Demand tables:

Corn

Feed up 25 million bushels

Ethanol up 50 million bushels

Exports unchanged

Soybeans and Wheat

Both saw minimal changes outside of the production increase.

Exports unchanged. Soybean crushing unchanged.

World carryout increased

World carryout increased for corn (+10 million tons), beans (+390k tons), and wheat (1.83 million tons).

Quarterly Grain Stocks

The December 1^st US grain stocks for corn, beans, and wheat were all larger than trade expectations. Corn was up 13% from last year, beans were down 1% from last year, and wheat was up 8% from last year.

Winter Wheat Seedings

US 2024 winter wheat seeded area were down 6% compared to 2023. The totals for all classes were below the average trade estimates. However, world wheat output and supply both increased according to the WASDE report.

South American production

The USDA cut their Brazilian production estimates less than trade expected. The USDA is taking a cautious approach to assessing the Brazilian crops. But they did increase their Argentine soybean production estimate mare than expected, raising it 2 million tons to 50.0 million tons. They left their Argentine corn production estimate unchanged.

Prices lower after the reports

Overall, US and world carryout increased in today’s reports. There were no bullish surprises. Forty-five minutes after the reports were dropped, all our crop markets are trading sharply lower than they were prior to the reports. Buy Signals continue. Chicago and KC wheat are likely to join everything else in Buy Signals when trading resumes next week.

Source: USDA, StoneX, Reuters

December 2023 USDA Supply & Demand

US corn and wheat stocks slightly smaller. Bean numbers unchanged.

The market appeared disappointed. The USDA did not make a reduction to the Brazilian crop as traders expected, and the global soybean ending stocks continue to be very large and painting a Big Red Bar on our charts.

Bean prices have been stuck in a downtrend which keeps commodity funds active on the sell side of their order pad. On the other side of the order pad, we continue to hear from Brazilian producers concerned about their soybean crop, while the biggest buyer in the world, China, has been active.

We have Sell Signals in wheat. This is the time to decide if you need to complete your sales. There was little change in the wheat numbers, but the market reaction remains negative. The world continues to make large wheat purchases out of Russia.

This week we had the commodity funds helping the wheat market and prices remain well above the green line 20-day moving average. Commodity funds remain heavily short the wheat markets, we should see more buying from them with prices in an uptrend.

The corn market has moved up above the green line 20-day average this week, but as we are writing these comments, prices are right back down on the green line. Today’s report offered little for either the bull or the bear. This week CONAB reported that Brazilian corn acres would be down by 5.3% due to the late planning of beans.

Meanwhile, we remain in the middle of a South American weather market.

Source: USDA, Bloomberg, StoneX

November 2023 USDA Supply & Demand

Traders react bearish to USDA numbers

Corn

The USDA raised their US corn yield estimate by nearly 2 bushels, increasing their estimate from 173.0 to 174.9 bpa from October to November.

The USDA raised the 2023 US corn production to a record 15.234 billion bushels, up from 15.064 billion last month, and the average trade estimate of 15.079 billion.

Corn ending stocks for next fall were estimated at 2.156 billion bushels, up from 2.111 billion last month, and the average trade guess of 2.131 billion bushels.

Corn is in a 4-Box Buy Signal. Livestock producers should be purchasing feed.

Soybeans

The USDA bean yield was also increased, moving to 49.9 bpa from 49.6 bpa last month.

The USDA soybean production estimate was pegged at 4.129 billion bushels, up from 4.104 billion last month.

Soybean carryover increased to 245 million bushels, compared to 220 million bushels last month, and the average trade estimate of 222 million bushels.

Wheat

US wheat carryout for next July increased to 684 million bushels, compared to 670 million last month and the average trade estimate of 669 million bushels.

Thoughts

These numbers were not enough to change anybody’s opinion about supply and demand. Maybe the corn number increased enough to make a little difference there, but what is much more important is the weather down in Brazil, war in the Black Sea region, and global political uncertainty. 

Right now, we believe the soybean market is up on a peak due to South American weather worries, a big round of Chinese business, and commodity fund buying. We were thankful to get the soybean Selll Signal this week and hope you were able to sell the beans you needed. That being said, we look for higher prices next year on beans, unless the Brazilian weather stages a change for the better.

The wheat prices have been beaten down for weeks because offers out of Ukraine and Russia have been discounted below other world offers. In addition, commodity funds have built large net short positions. Wheat markets are way overdue for a bounce. When wheat prices move solidly above the 20-day moving average, we should get very active fund buying and a boost in price. Or as we saw this week, if ships are attacked, prices rally.  

Source: USDA, Reuters, StoneX

October 2023 USDA Supply & Demand

The USDA cut their US corn and soybean yield estimates slightly more than expected. Corn came in at 173.0 bpa, and beans at 49.6 bpa this month.

US corn and soybean carryout totals were both smaller than trade expected, while the US wheat carryout came in larger than expected.

The global carryout totals for corn, beans, and wheat were all smaller than trade expected.

Prices of corn, beans, and wheat were all trading higher 30 minutes following the reports, with beans seeing the largest gains.

From the USDA

COARSE GRAINS: This month’s 2023/24 U.S. corn outlook is for reduced supplies, lower feed and residual use and exports, and smaller ending stocks. Corn production is forecast at 15.064 billion bushels, down 70 million on a cut in yield to 173.0 bushels per acre.

Corn supplies are forecast at 16.451 billion bushels, a decline of 160 million bushels from last month, with lower production and beginning stocks. Exports are reduced 25 million bushels reflecting smaller supplies and slow early-season demand. Feed and residual use is down 25 million bushels based on lower supply.

With supply falling more than use, corn ending stocks for 2023/24 are lowered 110 million bushels. The season-average corn price received by producers is raised 5 cents to $4.95 per bushel.

The 2023/24 foreign coarse grain outlook is for slightly higher production, larger trade, and greater stocks relative to last month. Foreign corn production is higher on increases for Argentina, Moldova, the EU, and Paraguay.

Foreign corn ending stocks are higher, mostly reflecting increases for Ukraine and Moldova. Global corn stocks, at 312.4 million tons, are down 1.6 million.

Soybeans: US soybean production is forecast at 4.1 billion bushels, down 42 million on lower yields. Harvested area is unchanged at 82.8 million acres. The soybean yield is projected at 49.6 bushels per acre, down 0.5 bushels from the September forecast. The largest production changes are for Kansas, Michigan, and Nebraska.

Soybean exports are reduced 35 million bushels to 1.76 billion with increased competition from South America. Soybean crush is projected at 2.3 billion bushels, up 10 million, driven by higher soybean meal exports and soybean oil domestic demand. With lower exports partly offset by increased crush, ending stocks are unchanged from last month at 220 million bushels.

The U.S. season-average soybean price for 2023/24 is unchanged at $12.90 per bushel. Soybean meal and oil prices are unchanged at $380 per short ton and 63 cents per pound, respectively.

Global 2023/24 soybean exports are lowered 0.2 million tons to 168.2 million with lower exports for the United States partly offset by higher shipments for Brazil. Global soybean crush is increased 0.8 million tons to 328.5 million on higher crush for China and the United States. Global soybean ending stocks are lowered 3.6 million tons to 115.6 million mainly on lower stocks for China, Brazil, and India.

WHEAT: The outlook for 2023/24 U.S. wheat this month is for higher supplies, increased domestic use, unchanged exports, and higher ending stocks.  Supplies are raised 85 million bushels, primarily on higher production as reported in the NASS Small Grains Annual Summary, released September 29.

Domestic use is raised 30 million bushels, all on higher feed and residual use. Exports remain at 700 million bushels with several offsetting by-class changes. Projected ending stocks are raised by 55 million bushels to 670 million, up 15 percent from last year.

The season-average farm price is reduced $0.20 per bushel to $7.30 on higher projected stocks and expectations for futures and cash prices for the remainder of the marketing year.

The global wheat outlook for 2023/24 is for reduced supplies, lower consumption, decreased trade, and lower stocks. Projected 2023/24 global ending stocks are lowered 0.5 million tons to 258.1 million, the lowest since 2015/16.

Source: USDA, Reuters

Source: USDA, StoneX

September 2023 Quarterly Grain Stocks & Small Grains Summary

More bean and wheat stocks than expected, less corn

Corn Stocks

Old crop corn stocks in all positions on September 1, 2023 totaled 1.36 billion bushels, down 1 percent from September 1, 2022. Of the total stocks, 605 million bushels are stored on farms, up 19 percent from a year earlier. Off-farm stocks, at 756 million bushels, are down 13 percent from a year ago.

The June - August 2023 indicated disappearance is 2.75 billion bushels, compared with 2.97 billion bushels during the same period last year.

Bean Stocks

Old crop soybeans stored in all positions on September 1, 2023 totaled 268 million bushels, down 2 percent from September 1, 2022. Soybean stocks stored on farms totaled 72.0 million bushels, up 14 percent from a year ago. Off-farm stocks, at 196 million bushels, are down 7 percent from last September. Indicated disappearance for June - August 2023 totaled 528 million bushels, down 24 percent from the same period a year earlier.

Comments

Corn prices were down 7-8 cents following the reports, while beans and wheat both quickly dropped 20 cents. Corn was no longer in a Sell Signal once prices were down more than a couple cents. KC and Minneapolis wheat remain in Buy Signals, and Chicago wheat will likely join then on Monday unless prices recover by the end of the day.

We remain concerned about the bean market and see multiple factors continuing to pressure price lower:

1. The spec funds continue to liquidate their long positions. If the trend remains down, that will remain their normal pattern. The 26 million bushel larger than expected Stocks total today only accelerates this downward trend. If you are trend follower, it is hard to be long in this bean market.
2. The fundamental risk is there is an abundance of global soybean supply. We are heading towards world ending stocks for soybeans being ample to burdensome. Sellers in South America will discount their prices to get their record productions sold and leave US sellers holding the bag.
3. Our shipping costs are increasing. Low levels on both the Mississippi River and Panama Canal and driving US export costs higher.
4. Rapidly advancing US harvest continues to exert pressure.
5. Increasing political tension between US and China. If you want an indication of how that relationship is faring this week, China just said they want their panda bears back and they will no longer allow US zoos to display pandas.

Small Grains Summary

The big surprise from the USDA was a sharp increase in their 2023 US wheat production estimate. They increased their estimate by 78 million bushels to 1.812 million bushels, when trade expected a 5 million bushel decrease. Production estimates for all classes of wheat except White wheat exceeded trade expectations.

Source: USDA, Bloomberg, StoneX

Mississippi Barge Rates to Challenge 2022 - Hil Anderson, Roach Ag Daily Grain Plan

A dry fall will do wonders for the pace of the harvest in the Mississippi River watershed, but it could also lead to a repeat of last year when historically low water levels snarled barge traffic and caused freight rates to soar.

Water levels along the Mississippi are reportedly already low enough to force operators to carry lighter loads, which won’t make it any easier or less expensive to haul newly harvested corn and soybeans to their downriver destinations. Tuesday’s reading at St. Louis was a little over -3 feet.

USDA statistics showed downbound barge rates turning sharply higher in late August and were basically doubled by the middle of September. The latest sampling pegged the acreage rate at Memphis at 817, virtually equal to the price some 800 miles to the north at Twin Cities. St. Louis rates, which were seen around 354 on Aug. 1, catapulted to nearly 721 last week.

Barge rates at different locations are used to calculate the final dollar price per ton for the trip. Last fall saw rates that worked out to a record spot price for St. Louis of $106 per ton for the week of Oct. 11, according to an analysis by the University of Illinois.

Drought conditions late last summer cut water levels to a record low of nearly 11 feet below normal and contributed to slower transit times and a dizzying spike in spot rates in St. Louis. Analysts said grain barge tonnage figures historically tend to be volatile in the fall. For example, rates along the Illinois River currently are lower for October than September.

“Typically, barges are loaded to a 11–12-foot draft during the fall, but companies started imposing 9-foot barge draft restrictions in October (2022), which can lead to a reduction of 10,000-15,000 bushels per barge,” the Illinois report said.

Heavy snowfall last winter provided a significant shot of water to the river, but the higher water levels didn’t last long, and the swift currents also stirred up the river bottom to the point that extensive dredging has been required to remove the resulting sandbars.

Meanwhile, Tuesday’s weather forecast was encouraging with a “slow-moving storm system over the nation’s mid-section” late in the week that could drop up to three inches of rain in the northern Plains and upper Midwest and bring thunderstorms to the southern Plains and upper Great Lakes. The extent that the rainfall leads to higher water levels in the Mississippi remains to be seen, and there could be a lot riding on the outcome.

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Climate Center Extends El Niño’s Stay - Hil Anderson, Roach Ag Daily Grain Plan

It looks like El Niño may be sticking around a little longer than previously expected.

The monthly update from the U.S. Climate Prediction Center issued Thursday said El Niño was 95% likely to dominate winter weather from January through March 2024; the CPC last month projected the condition would run through February.

The odds that “strong” El Niño conditions would dominate the Northern Hemisphere this fall bumped up from around 66% in last month’s forecast to 71% on Thursday.

The CPC noted August water temperatures along the Equator increased during July both on the surface and below. “Tropical atmospheric anomalies were also consistent with El Niño,” Thursday’s report said. “Over the east-central Pacific, low-level winds were anomalously westerly, while upper-level winds were anomalously easterly.”

After an unprecedented three years of La Niña conditions brought nagging drought to the Plains and California, El Niño is expected to shift the warm, dry conditions north into the upper Plains and most of the Midwest during the winter months while allowing cooler temperatures and welcome precipitation to slide into the Southwest and Texas.

While no two El Niños are exactly alike, its arrival raises questions for U.S. farmers this winter about snowfall, the arrival of frosts and freezes as well as the number of suitable days for harvest and planting in the spring.

The shifting weather patterns also bring their own impacts to other key agriculture areas around the world.

“Not only has precipitation been above average across the equatorial Pacific Ocean, but it has also been below-average over northern South America, Central America, and parts of Indonesia and India,” the CPC said in a separate blog.

The Australian Bureau of Meteorology this week said its El Niño Alert was continuing with water temperatures in the Indian Ocean creeping up and increasing the Indian Ocean Dipole (IOD) Index. “A positive IOD typically decreases spring rainfall for central and southeast Australia and can increase the drying influence of El Niño,” the bureau said. “The long-range forecast for Australia indicates warmer and drier than average conditions are likely across most of southern and eastern Australia from October to December.”

By coincidence, the question of managing shifting drought conditions throughout the world was the focus of the XVIII World Water Congress held this week in Beijing.

In her opening address to the conference, Maria Helena Semedo, the Deputy Director-General of the Food and Agriculture Organization of the United Nations (FAO), called on agriculture to play a more aggressive role in drastically improving water conservation on the world’s farms.

“By increasing efficiency, reducing negative impacts and reusing wastewater, agriculture holds the solutions to the global water crisis, as well as the key to achieving global water and food security,” said Semedo, who added that 70% of freshwater consumption worldwide was connected to agriculture.

Semedo said the FAO’s strategy calls for comprehensive planning for water resources around the world, including input from local communities, international organizations, and research institutions as well as the private sector.  “We need collaborative frameworks…to ensure inclusive and sustainable planning, financing, governance and implementation,” she told international delegates.

Source: Climate Prediction Center, FAO, Australian Bureau of Meteorology

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Report: Ethanol May Have to Wait Longer for Sustainable Aviation Fuel - Hil Anderson, Roach Ag Daily Grain Plan Ruling

The ethanol industry and the nation’s corn growers may have to wait until the end of the year, rather than later this month, to find out if the U.S. Department of Treasury will make it easier for them to qualify for tax credits and subsidies that will lead to the expanded use of ethanol to produce sustainable aviation fuel (SAF).

“At issue is a requirement in last year’s Inflation Reduction Act that SAF producers seeking tax credits must demonstrate with an approved scientific model that their fuel generates 50% less greenhouse gas emissions over its lifecycle than petroleum fuel,” Reuters said.

The ethanol industry has been lobbying for a scientific model that opens the door to a potentially significant role for ethanol as a feedstock for SAF in the air-transportation sector, but environmentalists argue the production of corn generates greenhouse gas emissions and that priority should be given to waste products such as used cooking oils and animal fat left over from food processing.

Differences of opinion also exist over the complex tracking of emissions generated in the production process, including changes to land use and carbon sequestered in the soil after a crop is harvested.

Agriculture has a lot riding on how the SAF debate plays out. Ethanol production in the Midwest could conceivably find a substantial new market before the gradual growth of electric vehicles cuts into their role as a gasoline additive. The soybean sector is already riding a wave of biofuel expansion; StoneX recently projected steady annul increases in crushing capacity to nearly 3 billion bushels per year by the end of the decade.

There are also new SAF production plants on the slate in the United States. Sen. Amy Klobuchar, D-Minn., announced a partnership late last month to launch an SAF production project to serve the Minneapolis-Saint Paul International Airport. “Homegrown sustainable aviation fuel is not only an economic generator for communities across the state,” Klobuchar said. “It is also an important tool to help us reduce our carbon footprint.

Earlier this year, United Airlines joined a partnership aimed at making ethanol SAF easier to produce. The airline said at the time that food waste likely will not be plentiful enough to ensure an adequate supply of SAF to meet increasing demand.

The crux of the matter is the methodology that will be used to determine the total carbon emissions from the production of ethanol aviation fuel. There are currently two of these complex modeling programs in use: the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model, which was developed by the U.S. Department of Energy, and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which was launched by the United Nations’ International Civil Aviation Organization (ICAO).

The ethanol industry prefers the GREET model since its land-use provisions are less stringent; however, environmental organizations prefer CORSIA, which favors the use of waste products over new crops. The ICAO announced this summer it had certified initial loads of CORSIA-compliant SAF produced in China, the Netherlands, and the United States.

As is often the case in the nation’s capital, agency deliberations over such high-stakes questions don’t always occur in a vacuum. Farm state lawmakers banded together this summer to introduce the Sustainable Aviation Fuels Accuracy Act of 2023, a bipartisan, industry-backed move to settle debate outright by allowing ethanol producers to use GREET in their emissions modeling to meet the technical definition of an SAF.

“Our measure ensures America’s domestic energy production is driven by the U.S. GREET model rather than relying on the current international model dictated by foreign countries like Russia and China,” said Sen. Joni Ernst, R-Iowa.

Iowa’s senior Senator, Republican Charles Grassley, dismissed the competing models as “outdated” and as “market barriers.”

“Our bill fixes the problem by requiring the FAA reference the most accurate GREET model for emissions, which is consistent with many other federal agencies,” said Grassley. “It would be a win for Iowa agriculture and the environment.”

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