The Feb. 9 World Agricultural Supply and Demand Estimates (WASDE) report lowered U.S. corn ending stocks by 50 million bushels from last month, to 1.5 billion bushels, with exports raised 50 million bushels due to historically large corn purchases by China. The supply/demand balance pushed up USDA’s season-average corn price estimate by 10 cents/bushel.
Increased exports and lower stockpiles were also reported for U.S. soybeans, with ending stocks falling 20 million bushels from last month, to 120 million. If realized, USDA said soybean ending stocks would be down 77 percent from 2019/20 and the lowest since 2013/14. The supply/demand outlook for 2020/21 U.S. wheat was largely unchanged from last month.
Corn futures in Chicago climbed in advance of the report, touching a new seven-year high amid expectations that the domestic inventory outlook would be cut even more because of increased demand from China and negative impacts to exports and output in South America due to adverse weather. A Bloomberg survey of analysts before the report’s release suggested that USDA would reduce estimates for corn and soybean stockpiles by 11 percent and 14 percent, respectively.
After the report, corn futures plunged and erased those early-week gains, but then regained momentum after USDA on Feb. 11 reported higher net exports of corn and soybeans, with both crops some 34 percent ahead of their respective five-year averages for the week ended Feb. 4, Bloomberg reported.
“In general, the WASDE was a bit of a disappointment for market bulls,” said Alexis Maxwell, Green Markets Research Director. “Leading into the report, analysts expected USDA to cut U.S. corn ending stocks by 168 million bushels on Chinese buying, but those bulls were disappointed when the actual cut was only 50 million bushels. To add further supply pressure to the corn market, global corn ending stocks were raised against trader expectations for a 4.5 million metric ton reduction. Corn prices fell on the higher-than-expected corn supply.”
The next major USDA market mover comes on March 31 with the release of both the Prospective Plantings and Quarterly Grains Stocks reports. The Prospective Plantings report is expected to show an increase in corn acreage with current estimates at 92-95 million acres, while the Grains Stocks report, historically a sleeper, has increasingly brought surprising adjustments to inventory levels and subsequent volatility for grains prices.
“The most important factor to watch now is the extreme cold hitting the Midwest and when temperatures will clear enough for farmers to get in the field,” Maxwell added. “Soil temperatures need to be above 50 degrees F to kick off the season, and right now Western Cornbelt soil temps are near 20-30 F with more extreme cold on the way, seemingly squashing hopes for an early start to the season.”