US corn exports, soy crush looking good
By KAREN SCHWALLER
There was good news in the June 12 USDA supply and demand report, with increased exports in U.S. corn and increases in U.S. soybean crush.
USDA indicated bullish numbers for corn, with world new-crop stocks coming in less than expected, paired with a crop reduction in the former Soviet Union.
U.S. soybean numbers were neutral to bullish, with crush demand increasing 30 million bushels in two seasons. The increase in Brazilian soy production was offset by a reduction in Argentinian production. Soy exports from the U.S. remained unchanged.
Todd Hultman, DTN grains analyst, said ending stocks for corn, soybeans and wheat were all lower than expected, while there were no changes in production and yield for corn and soybeans.
“There was a reduction in the old crop ending stocks estimate for the current season. It came down 80 million bushels … and that 80 million bushel adjustment is largely from an increase in the export estimate for corn, so USDA is still very optimistic about their corn estimates,” he said.
Hultman added U.S. corn production estimates were kept the same as a month ago, along with yield and acre estimates. He said the feed demand estimate (5.35 bb) is down 25 mb from last month’s estimates, but ethanol demand increased by 50 mb.
“If we take the 80 mb reduction in the old crop ending stocks and add a little more from the ethanol demand from the new crop season, you’ll see that ending stocks came down to 1.58 bb for the new crop season,” he said. “That’s down 105 mb from a year ago. It puts the ending stocks to use estimate just under 11 percent for the year, which is a decent improvement from the 14 percent we’re seeing in the current season.”
“Overall, these slight tweaks to the supply and demand tables are friendly to corn, and corn prices are getting a boost from that today.”
According to Hultman, there was a 4 mmt reduction in the new crop corn crop production estimate for the former Soviet Union due to the drier conditions there. Brazil was expected to have lower production numbers as well due to dry conditions, and the tables showed their production was reduced from 87 mmt to 85 mmt. Argentine estimates were kept the same at 33 mmt.
The new 2018-2019 crop world ending stocks estimate came in at 154.7 mmt., down 38 mmt from a year ago.
Old crop corn exports were up 75 bb from last month, yet Hultman said overall exports were short about 168 mb.
“That tells us that USDA’s estimate of 2.3 bb was somewhat of an aggressive reach,” said Hultman. “I will give them room because of Brazil’s shortfall due to the dry weather they’re having. We have seen corn shipments increase late in the season, so it’s still possible for USDA’s estimate to come through, but at this point, it looks pretty aggressive.”
He also said it appears that the highest price coming from the corn market is “behind us” at this point in the season.
Old crop ending stocks came in 25 mb lower than one month ago, due to an increase in the U.S. crush total. USDA estimates crush at 2.015 mb in the current season.
“Crush remains the only bright light for soybeans in the current season, with exports struggling,” said Hultman.
Projected ending stocks for new crop soybeans came in at 385 mb – 30 mb less than expected. Hultman said that number came from the increase in old and new crop crush estimates. Soybean export estimates were also not reduced, allowing the increased crush estimates to still give lower ending stock estimates.
He added Brazilian soybean producers are well on their way to record crop numbers, while Argentina’s soybean producers are struggling with drought. Both production numbers canceled each other out.
New crop soybean ending stocks were up very slightly at 87 mmt., and Hultman said the markets are looking neutral for soybeans as a result.
USDA’s export estimates for the current season remained unchanged at 2.065 bb, with year-to-date shipments coming in at 1.712 bb. According to the shipment pace, U.S. soybean exports are short of USDA estimates by 184 mb.
“We have three months to go to get to Aug. 31 (the end of the season), so there’s still time for the gap to narrow, but it’s hard to believe we’ll reach USDA’s total yet this year,” said Hultman.
Additionally, he said the percent of return on soybean crushings comes in at 23 percent, which is higher than any returns seen since 2001, and far above the 10-year average. He said it’s a good incentive to keep crushing soybeans in the U.S.
Hultman called the soybean basis bearish, staying close to their lowest levels in five years. Currently it is 65 cents under the July contract, while he said the five-year average basis is 20 cents under. He said soybeans situations have been “tight” lately, and this basis difference indicates there are plenty of soybeans around the country yet.
He said the U.S. soybean market is 12 cents cheaper than Brazil’s market, but because Brazil has a transportation advantage, they are still China’s cheaper alternative.
Additionally, U.S. soybean prices trended higher through the winter months, but because of Argentina’s drought, it accelerated the typical buying of the season, which peaked in early March. Hultman said soybeans have now dropped sharply lower, related to fairly good start to crop conditions in the U.S.
“It’s looking more like the seasonal high for soybeans is behind us, even though it typically comes in early July,” he said.
There are also dry conditions in many areas across the cornbelt, according to Hultman, although none are serious as of yet. However, he said they bear watching.
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