By Karl Setzer

Very few changes were made to the domestic corn balance sheets in the monthly WASDE report. U.S. ethanol and export demand were both raised 75 million bu (mbu) for a 150 mbu reduction to ending stocks. This put ending stocks for the 2021/21 marketing year at 1.1 billion bu (bbu). These changes carried over to the 2021/22 balance sheets and lowered ending stocks there to 1.36 bbu. New crop production was left unchanged this month at 14.99 bbu.

More alterations were made to the U.S. soybean balance sheets, and those did catch trade off guard. U.S. crush was reduced by 15 mbu which pushed old crop ending stocks to 135 mbu. As with corn this carried over to new crop where ending stocks increased to 155 mbu. While these are both historically tight it does give the market more breathing room for demand. The 2021/22 U.S. soybean crop was unchanged this month at 4.4 bbu.

The U.S. wheat balance sheets were also adjusted to give trade a bearish surprise. The USDA increased all-wheat production by 26 mbu, putting the total U.S. crop at 1.89 bbu. Even with this increase, 2021/22 wheat ending stocks are forecast to tighten 4 mbu due to higher old crop exports. This is expected to leave the United States with 770 mbu of ending stocks next year, 82 mbu fewer than this year.

The USDA also updated its global numbers. The world corn ending stocks for the 2021/22 marketing year are projected at 289.4 million metric tons (mmt), a sharp 8.8 mmt reduction from this year. The world soybean reserve is expected to total 92.6 mmt at the end of the new marketing year, 4.6 mmt more than this year. The global wheat supply is forecast to increase 3.3 mmt from this year to next, putting ending stocks at 296.8 mmt.

Beef and pork production were little changed from May to June. U.S. beef production is now projected at 27.91 billion pounds this year and 27.34 billion pounds for 2022. Steers are forecast to average $117.00 per hundredweight (cwt) this year and $121.5 cwt next year. Pork production is forecast at 28.19 billion pounds this year and 28.55 billion pounds for 2022. Hog values are projected to average $70.18 cwt for 2021 and $56.25 cwt in 2022.

Ahead of this data, the Brazilian firm Conab released its updated production estimates. As expected, the group lowered its corn production figure due to a 14 percent decrease in the Safrinha crop. This put total Brazilian corn production at 96.4 mmt compared to 106.4 mmt in the May report, and below last year’s 102.6 mmt crop. Conab raised its soybean production figure though, putting it at 135.9 mmt compared to the 134.5 mmt May estimate. Last year’s Brazilian soybean crop totaled 124.8 mmt.

By far, weather is the predominant fundamental factor in today’s trade. Many analysts are comparing this year to those in recent history, and one that is being mentioned is 2012. While current weather conditions are currently the driest since 2012, they are not nearly as bad. A reported 42 percent of the United States has been drier than normal over the past 30 days. In the drought year of 2012 this was 71 percent of the United States over the same period.

Debate is increasing over potential acreage changes from the March planting intentions, mainly on corn. We have seen a few estimates recently that indicate corn plantings this year will be closer to 96 or 97 million in the June revisions, nearly 6 million more acres than earlier estimated. Others are not as optimistic on elevated plantings and believe they will only increase by 2 to 3 million. The real question will be if any increase is seen to soybeans, as that is the commodity that needs to most production given current stocks to use forecasts.

Chinese officials have announced measures will likely be taken in the near future to build commodity reserves. This will focus mainly on feed grains, specifically corn and wheat. Recent purchases indicate China may have already started this process as current corn bookings are estimated at 15 mmt. These are split between the United States and Ukraine. The Chinese government is expected to give out another 7 mmt of corn import certificates this summer. Given the uncertainty surrounding the size of the Brazilian crop, the bulk of this trade may be done with the United States. 

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