November WASDE offers Surprise Numbers--Allendale's Rich Nelson ExplainsTue, 10 Nov 2020 15:12:04 CST
USDA on Tuesday released its November Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports. Associate Farm Director, KC Sheperd spoke with Allendale's Rich Nelson to see what the November numbers looked like. Nelson said there were a few surprises, "This was a big change here for the trade expectation. So often we see minimal changes on production for this report. In this case, USDA's, 215, million bushel decline from the October estimate that was, in fact, the second largest decline they've noted on these November reports in history, so big decline there. Also the second shocker and probably a bigger issue on the market impact was a 325 million bushel revision higher USDA.S export estimate."
Nelson also says USDA was pretty agressive with the corn export numbers, "So bottom line is we went ending stocks from under 2.2 billion bushel on the corn side. Now, 1.7 is the lowest ending stock and stock to use number in seven years for corn so definitely a dramatic change for the balance sheet."
There was discussion on the Soybean numbers as well as we did see lower production by 98 million bushels, "This was a record decline for this November, so big drop there, and biggest issue for a lot of us on the demand side of things here, they didn't touch anything regarding domestic crush or exports. Many of us would argue both those need to be raised in future reports. So bottom line for the soybean discussion now, or 190 million bushels lowest ending stack in seven years, and get this statistic, lowest stocks to use for soybeans on the US side, second lowest since 1965. So, in terms of market impact, certainly the corn and soybean sides we turned some heads here today" said Nelson.
To hear more analysis from Rich Nelson at Allendale, Click or tap below.
USDA lowered the average corn yield by 2.6 bushels per acre (bpa) in the report, down to 175.8 bpa. That dropped corn production by 215 million bushels (mb) to 14.5 billion bushels (bb). USDA lowered new-crop ending stocks to 1.7 bb, following a 325 mb increase to export forecasts.
Soybean ending stocks estimates for the 2020-21 marketing year came in at 190 mb -- 100 mb lower than last month. Despite rising interest from China, the change didn't come from exports. USDA lowered its production estimate for soybeans by 98 mb to 4.170 bb by lowering the average national yield to 50.7 bpa.
You can also access the full reports here:
-- Crop Production: https://www.nass.usda.gov/-
-- World Agricultural Supply and Demand Estimates (WASDE): http://www.usda.gov/-
Several surprises came in the 2020-21 corn numbers as USDA lowered the average corn yield to 175.8 bpa, a 2.6-bushel decline from October, while USDA also increased export sales for corn to a potential record volume as well and dramatically cut the estimated ending stocks.
Keeping harvested acres at 82.5 million acres, that lowered 2020-21 corn production to 14.507 bb, a 215 mb decline from the October estimate. That put total supply at 16.527 bb.
On the demand side, USDA lowered total domestic use by 75 mb by lowering the feed and residual use for corn by that amount, bringing feed and residual use down to 5.7 bb, based on a smaller crop and higher expected prices. Ethanol demand remained steady at 5.05 bb.
Exports were the 2020-21 corn crop were pumped up to 2.65 bb, up 325 mb from the October estimated. If realized, that would be a record high for U.S. corn exports, USDA stated.
Total use was forecast at 14.825 bb, up 250 mb from October. That brought down ending stocks to an estimated 1.702 bb, a decline 465 mb from October.
The stocks-to-use ratio for corn came it at 11.48%, compared to 14.8% in the October report.
The average farm price for the 2020-21 corn crop was posted at $4.00 a bushel, a robust 40-cent bump from the October report.
Globally, USDA also raised the import estimates for Chinese corn imports to 13 million metric tons (mmt), up from 7 mmt estimated in the October report.
U.S. soybean growers are expected to harvested 4.17 bb this fall, 98 mb lower than what USDA estimated last month. The agency cut its yield estimate by 1.2 bpa to 50.7 bpa, below the range of pre-report expectations. The agency said lower yields were reported in major soybean growing states, including Illinois, Iowa, Indiana, Ohio and Nebraska.
The production change resulted in most of the 100-million-bushel decline in new-crop soybean ending stocks. USDA put ending stocks at 190 mb. It also made small tweaks to seed use, up 3 mb, and residual use, down 1 mb.
The national average farm gate price increased by 60 cents to $10.40 per bushel.
Globally, USDA lowered 2020-21 ending stocks to 86.52 million metric tons (mmt), which is toward the low end of pre-report expectations. USDA left Brazilian production unchanged at 133 mmt but lowered Argentine production by 1.5 mmt to 51 mmt. Chinese import demand was left unchanged at 100 mmt.
USDA pegged 2020-21 U.S. wheat production at 1.826 bb, unchanged from last month. Average yield was also left at 49.7 bpa, with acreage still forecast for 44.3 million acres planted. Old-crop (2019-20) wheat production was also left unchanged 1.08 bb.
The agency trimmed ending stocks to 877 mb, in line with pre-report analyst estimates. That drop came from USDA upping food use of wheat stocks by 5 mb and seed by 1 mb.
Globally, USDA pegged total wheat production for 2020-21 at 772.38 mmt, a 0.7 mmt decrease from the October report. That drop came mostly from production losses in Argentina, where drought and a local freeze dropped its forecast production down 1 mmt to the lowest in eight years, at 18 mmt.
World ending stocks were projected at 320.45 mmt, in line with pre-report analyst estimates, and down 1 mmt from October, due to increased world consumption, mainly from higher feed and residual use for China and the EU. China's wheat imports hit 8 million tons, on track to be the largest since 1995-96.
Total 2020 beef production estimates increased 85 million pounds in the November report, with a total yearly projection of 27.2 billion pounds. This adjustment counters a 20-million-pound reduction in fourth quarter production seen from the October report. Estimated 2021 beef production is unchanged at 27.3 billion pounds.
Estimated pork production increased 24 million pounds for the entire 2020 year with a total yearly production estimated of 28.1 billion pounds. This pork production would account to a 543-million-pound increase from 2019 levels. This comes from an estimated 35-million-pound increase in pork production in the fourth quarter of 2020. Estimates for 2021 production also increased for pork production increasing 25 million pounds.
Annual steer price estimated were left unchanged at $108.71 per cwt. While barrow and gilt prices slipped $0.25 per cwt to $43 per cwt in the November report.
Beef ending stocks slipped 25 million pounds, despite a 9 million gain in expected exports through the year. At this point, beef exports and ending stocks are unchanged from October levels. Pork total use for 2020 increased 68 million pounds to 21.8 billion pounds in the November report. This followed a slight decrease in both exports and ending stocks from the October report.
Limited market direction is likely to be seen from the November WASDE report with the overall report generally neutral for beef and pork.
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