The U.S. corn and soybean crops have had a rollercoaster start to the season with extreme dryness followed by ample rains in some areas, though the market will have to wait until next month for direction from the government on yield potential.
Meanwhile, U.S. corn and soybean exporters are capping off what is expected to be a record season, though foreign interest from top importer China has slowed as have recent U.S. shipments.
The U.S. Department of Agriculture on Monday published its July supply and demand report, which is usually relatively calm versus the August update or June acreage survey. The agency this month typically sticks with its trendline yields for U.S. corn and soybeans.
Despite analysts’ predictions for a small yield cut based on poor conditions in the western Corn Belt, USDA left corn yield unchanged at 179.5 bushels per acre and soybeans stayed at 50.8 bpa. For corn that would be a record by 2.9 bpa.
USDA’s statistics agency will publish its first survey-based yield estimates next month, but the inclusion of field measurements will not enter the mix until September.
One factor that raises questions on USDA’s high trend yields is how poorly the spring wheat crop is doing in the Northern Plains. As of Sunday, some 55% of the crop was rated poor or very poor and just 16% was considered good or excellent, the worst ratings on either end since 1988.
USDA pegged U.S. spring wheat production at 345 million bushels, the smallest since 1988 with yield at a 19-year low. North Dakota, Minnesota and South Dakota, which planted 68% of the U.S. spring wheat, are also key corn and soybean growers. The share of U.S. corn and soy plantings in the Dakotas is record high this year at 12.4%.
This will put more pressure on top producers Iowa and Illinois, where record yields might be needed to offset production losses in the northwestern Corn Belt. Some 66% of Iowa corn is rated good or excellent, up 10 percentage points from three weeks earlier, but Illinois dropped 5 points on the week to 60%, a season low.
Iowa notched its record corn yield in 2016 and Illinois did it in 2018. During this week in those years, Iowa corn was 79% good or excellent and Illinois was 81%.
CHINESE DEMAND QUESTIONS
High soybean stocks and slower soybean meal demand in China led USDA to reduce the country’s projected imports by 3 million tonnes with 2 million of that in the 2020-21 year and 1 million in the next. The agency did not reduce China’s actual usage expectations, but the import cut validated some market concerns.
USDA reduced old-crop U.S. soybean exports fractionally to 2.27 billion bushels, still a record. New-crop exports were maintained at 2.075 billion bushels. Brazil and Argentina’s old-crop shipments were reduced 5.65 million tonnes (208 million bushels) but new-crop exports were unchanged.
The United States has not shipped a full cargo of soybeans to China since early April, but the latest ledger of unshipped sales suggests at least 11 cargoes must be processed before 2020-21 ends on Aug. 31. Chinese buyers made one large purchase of new-crop U.S. soybeans at the end of June but have otherwise been quiet in recent months.
USDA maintained China’s corn imports at 26 million tonnes for both old and new crop, but China’s corn demand has also raised questions in the market. Part of that has to do with larger crop expectations there versus a year ago, and the Asian country last purchased new-crop U.S. corn in May.
Some analysts think 2020-21 U.S. corn exports at a record 2.85 billion bushels, unchanged from June, are too heavy because weekly shipments have slowed and late-season sales have been weak. A smaller Brazilian crop is the likely culprit for the big U.S. export target, but Brazil’s troubles have been known for some time and U.S. bookings have yet to receive a lift.
U.S. corn shipments to China in the last three weeks totaled less than 500,000 tonnes each, well off the average weekly pace from May and June of more than 700,000 tonnes. At least 5 million tonnes await shipment to China by Aug. 31.
USDA increased 2021-22 U.S. corn exports by 50 million bushels to 2.5 billion. This could be questionable given slower demand and a large crop have been predicted in Northern Hemisphere competitor Ukraine, also a big corn supplier to China.
No changes were made to U.S. corn used for ethanol, but recent weekly output data suggests USDA’s 2020-21 peg might be up to 75 million bushels too light at 5.05 billion bushels. New-crop corn for ethanol at 5.2 billion bushels, below the pre-pandemic average, may also have room for growth.
Source: Reuters