By Karl Setzer

 U.S. corn production was little changed in the November supply and demand report from the USDA. The average corn yield increased ½ bushel per acre to a 177 bushel-per-acre forecast. Total corn production increased 43 million bu (mbu) to a 15.06 billion bu (bbu) total. Corn use increased 50 mbu from elevated ethanol demand. This was enough to lower ending stocks to 1.49 bbu, 7 mbu less than in October. The cash corn value estimate was unchanged at $5.45 per bushel.

Trade was caught by surprise on the domestic soybean figures. The average U.S. soybean yield is now estimated at 51.2 bushels per acre, down 3/10ths of a bushel from October, while an increase was expected. This yield put the U.S. soybean crop at 4.43 bbu, down 23 mbu from last month, but still 209 mbu larger than last year’s crop. This lower production was offset by a 43 mbu reduction to demand, mostly from poor exports. U.S. ending stocks increased 20 mbu from last month and are now pegged at 340 mbu. The average soybean value was lowered 25 cents per bushel to $12.10.

For wheat, the USDA lowered imports by 10 mbu, but also reduced exports by 15 mbu. The USDA also increased wheat seed demand by 4 mbu as larger spring acres are forecast. This carried over into a 3 mbu increase to ending stocks on wheat, placing them at 583 mbu. This is a sharp year-to-year reduction of 262 mbu. The average cash wheat value increased 20 cents per bushel to $6.90.

Global numbers were mixed from October. The world corn carryout estimate is now at 304.4 million metric tons (mmt), up 2.7 mmt from last month. Global soybean ending stocks are now estimated at 103.8 mmt, down 800,000 metric tons from October, but 3.7 mmt more than last year. The world wheat balance sheets are forecast to tighten 12.1 mmt from last year to a 275.8 mmt total.

Very few changes took place in the U.S. beef and pork production figures. Beef production for 2021 increased a small 50 million pounds to a 27.88 billion pounds total. Beef production for 2022 was left unchanged at 27 billion pounds. Pork production for 2021 was unchanged on the month at 27.68 billion pounds as was the 2022 estimate at 27.59 billion pounds. The average steer price projection for 2022 is now at $130 per hundredweight, and the hog projection is at $60.25 per hundredweight.

While the rally in the energy market has impacted shipping rates and limited demand, it has greatly benefited the renewable fuel industry. Typically, when corn values are as high as they currently are, we see a decline in profit margins. The high energy costs are negating this, and many plants are reporting margins of 50 cents per gallon. Ethanol exports have not slowed either, giving the industry additional support.

The global soy complex remains focused on China and their buying habits. China continues to source the majority of their needs from Brazil, which is expected to push their November sales above the level of 2020. Brazil is also selling soybeans for December shipment, greatly reducing the window for U.S. sales. The question now is if we have seen the highest soybean export forecast of the marketing year and future adjustments need to be made.

We are starting to see more interest on global freight rates. As energy values rally, so does the cost of moving commodities from one country to another. This has some buyers opting to secure coverage from sources with lower freight rates rather than just the lowest priced commodities. This has shifted some buyers away from the United States, especially with a sharply higher U.S. dollar.

One of the greatest hindrances to U.S. exports is logistics. Repairs have been made to Gulf terminals in recent weeks, but we are still not at full capacity on exports. It is also taking time for empty barges to move north and bring inventory back for loading. The Pacific Northwest is also seeing export issues with port space fully booked into January, further deterring importer interest.

Recent rainfall in South America has been welcomed by farmers, but the precipitation has done more than just replenish dry farmland. Water levels have started to rebuild in South American river systems, improving barge movement, and allowing for more exports. Even with improved conditions, barges in most regions of South America can still only operate at 50 percent of capacity. While slow, this is giving buyers more alternatives for coverage.

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