Morning Comments June 10, 2021

Corn closeup

June USDA S&D Report Updates, June 10, 2021

Corn: USDA increases both 20/21 corn exports and ethanol usage by 75 million bushels this month, leaving old-crop carryout down a sharp 150 mbu; that carries through an unchanged new-crop S&D as well for a 150 mbu overall stocks decline. World corn production drops 3.4 MMT for 21/22, all from a 3.5 MMT cut in Brazilian output, though that decline fell short of expectations even. Again, that change basically carries through the NC balance table for a 3-ish MMT overall inventory drop.

Beans: old-crop crush is finally reduced this time, down 15 mbu this month and leaving 20/21 ending stocks up 15 mbu. That change carries through the new crop as well for a +15 mbu stocks change overall. Old-crop world production and stocks are up around 1 MMT on a 1 MMT Brazilian output increase. World ending stocks will be up 1.5 MMT by the end of 21/22 with few other changes.

We are a few hours away from seeing the next installment of S&D data from the USDA. Let’s go over a few of the key numbers we will be watching for at 11 a.m.:

  • 20/21 Corn ending stocks
    • Average trade estimate: 1.203b bushels (was 1.257b last month)
    • Comments: the trade is expecting our carryouts to tighten further in today’s report. Some combination of demand increases in feed, ethanol and exports are expected. With what we’ve seen over the last month with strong export sales and firm ethanol margins, they are also probably warranted.
  • 21/22 Corn ending stocks
    • Average trade estimate: 1.417b bushels (was 1.507b last month)
    • Comments: the trade is expecting a healthy reduction in carryout for next year and (contrary to the hot/dry weather story of late) this has more to do with demand than it does supply. Many traders feel that if there are revisions to production (which would be pretty rare for the June report), it will be in the form of increases thanks to perceived shifts in acreage. It’s probably a little too early to see the USDA start tweaking acreage/yields (though they can if they want to!), we usually need to get through the June 30th acreage report to see that. That means the projected drop in carryout to 1.417b bushels is coming from the smaller carry-in and the demand side of the equation for next year which still looks very strong for both ethanol and exports.
  • 20/21 Brazilian corn production
    • Average trade estimate: 97.0m MT (was 102.0m last month)
    • Comments: Here we go! For a few months now, the USDA has been (slowly) cutting back the Brazilian corn crop size. How low will they go today? The average trade guess of 97.0M MT is actually still quite a bit higher than most private estimates, the assumption being that the USDA will continue to slowly stairstep it lower, unwilling to rock the boat with the low number that many believe is out there. Remember: a reduction in Brazilian production could/should increase demand for 21/22 US corn exports. This is a big one to watch and could have a few ripples.
  • 20/21 Soybean ending stocks
    • Average trade estimate: 122m bushels (was 120m last month)
    • Comments: Yes, the trade estimate is for a slight increase in soybean carryout this year thanks to talk of reduced crush combined with some squishiness in exports (China meal demand in particular). Overall, though, soybean traders aren’t expecting many changes today. Big picture though, we need to remember that this carryout is still only 122 million bushels, which is TIGHT. I’m not sure that a couple million bushels, either way, changes the market structure for this summer as we try to bridge the gap to new crop.
  • 21/22 Soybean ending stocks
    • Average trade estimate: 143m bushels (was 140m last month)
    • Comments: Similar to the old crop situation – the trade isn’t looking for any wild shifts in the new crop bean picture today either, expecting slight carry-out increases next year, in line with the small increases expected this summer. Side note while I’m thinking about next year: maybe it’s just me, but the 21/22 soybean production story doesn’t seem to be getting much attention. Of course, we probably need to better understand acres first (coming June 30th) and the bean weather story doesn’t usually ramp up until August. However, when you have carry-outs STARTING at 140-150 million bushels, soybeans – maybe even more so than corn – cannot afford to have weather issues.

There are of course plenty of other moving pieces in this USDA data dump that could affect price action today, but those are five of the big ones for us. We will just have to watch and see how close the trade guesses (listed above in bold) are to the actual numbers and go from there. I’m sure there will be plenty of volatility the second the report comes out and unsurprisingly we have seen savvy producers calling to get their new crop offers in working above the market, hoping to catch something on a spike up. Not a bad idea, even it's just for a couple loads!


Corn is steady to 4 cents higher

Soybeans are 4 to 7 cents higher