Last Wednesday, USDA released its Sept. 1 Grain Stocks report and its Small Grains Annual Summary.
The Grain Stocks report took center stage with lower-than-expected totals for Sept. 1 across the major crops. Corn stocks were the largest shocker, coming in well below expectations and indicating a strong finish on the use side to the 2019/20 balance sheet.
Production revisions for the 2019 corn/soybean crops also were included but were minor. All wheat production was revised lower, and 2019/20 wheat ending stocks were revised lower as well.
Putting a bookend on the 2019 crop marketing year, USDA reported ending stocks at 1,995 MBU, well below trade estimates and USDA’s own forecasts of 2,225 MBU. Data on exports have yet to be finalized for August, but based on data through July it seems likely annual exports for 2019 are around 1,790 MBU, up from USDA’s forecast of 1,765 MBU. For industrial use, FBN pegs it at 6,245 MBU, slightly below the USDA estimate of 6,265 MBU. So, that leaves feed use, which showed much better increases than USDA had factored. For the year, USDA had penciled in 5,600 MBU, but the final number should be closer to 5,800 MBU.
Given lower DDG supplies, increased wheat and milo prices, it would seem corn disappearance between March 1 and June 1 was about 200 MBU above USDA’s own projections. Regardless of the balance sheet calculus, the important message is that stocks are well below what the trade thought, and if USDA brings another downgrade to yield/production, then the U.S. balance sheet should look to be close to 2 billion bushel carryout and gives prices more upside potential out of harvest.
For soybeans, there was a bigger mystery as to how stocks came in so low. Stocks were down at 523 MBU, off from the 575 MBU expected. Soy crush figures are likely 2,165 MBU, close to the USDA estimates of 2,170 MBU. But where USDA is likely off the mark is exports, which finished strong in August. FBN puts final soy exports at 1,720 MBU for the year, above the 1,680 MBU figure from USDA. Regardless, as in the case of corn, a drop in stocks continues to suggest better pricing opportunities. FBN still expects soy prices to continue to chart out higher territory in the coming months, with added support from a dry South America and strong Chinese demand.
USDA revised June 1 stocks, cutting 16 million bushels from old-crop supplies. The agency also reduced the all wheat production estimate, cutting 12 million bushels from that volume. While those revisions were minor, the changes have great implications for by-class balance sheets. HRW and SRW wheat stocks are now forecast to be lighter than previously expected, while HRS and durum stocks are still forecast to be large. This could mean that Kansas City futures will gain ground on Minneapolis in the coming weeks. It also means that HRW stocks are looking to be at their tightest level in years and that all wheat stocks are inching closer to being below the 900-million-bushel mark. This situation is supportive overall for winter wheat markets with pricing opportunities present for those producers who are not 100 percent sold on old-crop nor have any sales on the books for new-crop. For HRS, we are seeking levels closer to the $5.50 mark on the nearby. The pricing opportunities will likely be limited for HRS this crop year but are expected to improve for 2021/22.
The Grain Stocks was another supportive element for the corn/soybean complexes — this time on the supply side. The smaller totals resulted in a boost to price expectations for both crops.
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