USDA Report Analysis: Is the U.S. Running Out of Soybeans to Sell?
Ben Brown January Report Final
USDA’S final crop production report of the year made some historic adjustments. As a result, soybeans shot 60 cents higher in a matter of minutes, and corn traded up the limit.
While the corn revisions seemed to be the bigger story on Tuesday, University of Missouri extension economist Ben Brown says USDA produced several surprises in its report on Tuesday.
“I continue to believe after today that the story was really about corn, and especially the corn yield drop,” he says. “We found in our first quarter stocks report this month, it came in 651 million bushels blow trade estimate. So that's a large bullish surprise.”
Okay- I evidentially need to go back further than 1990 to find a bigger drop in the final corn estimate but the 3.8 bu./acre drop was largest in 30 years. Also got to switch my graph colors from scarlet and grey to black and gold #MIZZOU pic.twitter.com/Pf1dir2Xbh — Ben Brown (@BenBrownMU) January 12, 2021
Another bullish revision was the yield drop. USDA reduced the 2020 national corn yield by 3.8 bushels per acre, which was historic.
“That is large reduction,” Brown says. “I went back 30 years to 1990 and I couldn't find a bigger yield drop from the November production report to the final production report. So that's an unusually large drop.”
Today's 3.8-bushel decline in the #corn yield from USDA's November estimate, is the largest of the past quarter century plus. #oatt — Arlan Suderman (@ArlanFF101) January 12, 2021
Where did the corn crop go? USDA says some of the largest cuts to the corn yield came in Iowa, Minnesota and Illinois, which means August’s derecho, combined with dryness this summer, had a bigger impact than originally thought.
State #Corn & #Soybean Yields v Previous Year: pic.twitter.com/EUyKsRtgjE — Darin D. Fessler ?? (@DDFalpha) January 12, 2021
“That's where I think Minnesota and Wisconsin come into play here a little bit, with both states seeing 10 bushel per acre reductions,” he says. “And so big yield reductions for corn leading to that very bullish price action that we saw today.”
Story in Soybeans
That bullish price action caused corn to trade the limit higher, but soybeans also saw strength. Brown says while USDA’s adjustments to soybean yield were much smaller, only trimming the crop by 0.5 bushels per acre, the more bullish scenario is in soybean stocks.
“We're getting to really tight soybean stocks,” says Brown. “If you look at soybean stocks as a percentage of our use, it’s at 3%, which is, which is very tight. That is signaling that we're going continue to ration demand with higher prices. This is some of our tightest stocks we've seen in the last couple of decades, when you look at that percentage of use.”
With stocks to use at the lowest level in two decades, is it tight enough to say the U.S. is running out of soybeans?
“I hate to go as far as say we're going to run out of soybeans, because when you look at some of these export numbers, we just can't sustain the pace we're on because there's just not physically enough soybeans to sustain the pace we're on,” he says.
Brown says USDA made slight adjustments to the South American crop, based on revisions in Argentina. He says USDA didn’t make any revisions to Brazil, leaving the estimate at 133 million metric tons, which would be a record, but thinks USDA will have a better idea of just how big the Brazilian soybean crop is next month.
“We're looking at a pretty large South American soybean production coming still, so I hate to say we're going to run out of soybeans, but the next three to four weeks, we could see some very bullish price action until Brazil's crop comes on board,” Brown ads. “In the meantime, yes, we're maybe a little bit short, but I think you're going to see shippers wait just a little bit before that South American production comes on board.”
Brown says while there are a lot of factors to digest in Tuesday's report, and demand concerns brewing for corn, he thinks Tuesday's reports did little to dampen the market sentiment leading to higher commodity prices over the past five months.
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