Milling & Baking News - April 20, 2021 - 20

Ingredient Market Insight

Soybean
Soybeancarryover
carryoverstocks
stocks

Corn
Corncarryover
carryoverstocks
stocks

'12
'12 '13
'13 '14
'14 '15
'15 '16
'16 '17
'17 '18
'18 '19
'19 '20
'20 '21
'21
Source:
Source:US
USDepartment
DepartmentofofAgriculture
Agriculture

*projected
*projected

recent forecast as long as the weather
holds, " Mr. Harris said.
Mr. Meyers said, " I think acreage will
be higher. I think when we get the June
Acreage report that the total acres of corn
and soybeans combined will be 2 million
to 3 million acres higher than indicated in
the March intentions. " He said the combined increase seen for the two crops may
be pretty evenly split between them.
Mr. Meyers compared this year's Prospective Plantings report with the 2020 edition to
support his expectations. In the 2021 report,
the USDA said farmers intend to plant 316
million acres to the 19 principal field crops
this spring. In the March 2020 report, the
USDA said farmers intended to plant 319
million bus. Mr. Meyers said it was difficult
to believe farmers intend to plant 3 million
fewer acres to field crops this year than last
when prices this year have been the highest
seen in eight or nine years.
Asked about what he sees as corn market drivers in the next few months, Mr.
Harris said, " The primary driver over the
next few months will be the weather, and
we expect breaks to be well supported
until we make it through the critical 'pollination' phase in June/July. Using December futures, we would expect a range
between $4.70 and $5.70 a bu. "
Mr. Meyers pointed to three considerations. First was South American weather. The harvest was beginning in Argentina. The USDA lowered its forecast for
the Argentine crop to 47 million tonnes
from 47.5 million as the March outlook
because of dryness. The Brazilian second
corn crop also will be important because
Brazil exports a significant part of it, Mr.
Meyers said. Brazilian total corn production in 2020-21 was forecast at 109 million
bus, and Brazilian 2020-21 corn exports
were forecast at 39 million tonnes.
The second market driver was planting
progress in the United States.
" If we have more favorable weather
than we've had the (past) couple years,
20 / April 20, 2021

1,919
1,919
1,352*
1,352*

2,140
2,140
2,221
2,221

1,737
1,737
2,293
2,293

1,232
1,232
1,731
1,731

821
821

989
989

(Sept.
(Sept.1,1,ininmillion
millionbus)
bus)

525
525
120*
120*

438
438
909
909

302
302

191
191
197
197

141
141
92
92

169
169

(Sept.
(Sept.1,1,ininmillion
millionbus)
bus)

'12
'12 '13
'13 '14
'14 '15
'15 '16
'16 '17
'17 '18
'18 '19
'19 '20
'20 '21
'21
Source:
Source:US
USDepartment
DepartmentofofAgriculture
Agriculture

*projected
*projected

farmers should be able to get it all planted, " Mr. Meyers said. " Then, as we get
into the end of June, we'll get the Acreage
report. That will be critically important because we're starting the 2021-22 year with
sharply reduced carryover stocks of corn
and soybeans. We will want to see if those
additional acres that a lot of people expect
to show up in the report are actually there.
But ending up with what the intentions
said would imply an even tighter supplyand-demand outlook for next year. "
Mr. Meyers said he expected the July
corn future to range between $5.25 and
$5.90 in the coming weeks.
While soybean futures recently posted
new contract highs, nearby contracts
have traded in a $1-a-bu range since the
beginning of March. At the same time, the
spread between old crop soybean futures
and the contracts reflecting expected
2021-22 supply and demand, which has
been very wide, has narrowed.
" I think the soybean crop in Brazil is
turning out larger than expected, " Mr.
Meyers said. " Harvest progress there
picked up after a slow start. And you've
had a significant cutback in US soybean
export sales. The combination of the things
has caused the market to trade sideways. "
Mr. Harris added, " The new crop soybean markets (November) made a new
contract high in early April and has rallied 47% since last August. The spreads
have weakened in recent weeks after the
USDA's March 31 estimate of March 1
soybean stocks came in higher than expected and news out of Brazil of record
soybean production there. "
The USDA on April 9 forecast the carryover of soybeans on Sept. 1, 2021, at 120
million bus, unchanged from the March
outlook but down 77% from 525 million
bus in 2020. It would be the smallest soybean carryover since 92 million bus in 2014.
The USDA's only adjustments from March
applied to the demand side of the balance
sheet with 2020-21 exports raised 30 million

bus to a record 2,280 million, a 10-million-bu
reduction in crushings to 2,190 million bus,
a 2-million-bu reduction in seed use to 102
million bus, and a 17-million-bu reduction
to residual use to 4 million bus.
Asked his take on the soybean carryover number, Mr. Harris said, " We don't
think that the USDA will make any significant changes to the ending stocks over
the next few months, preferring to 'let the
market' do the work in the event that further supply rationing is needed. "
Mr. Meyer's agreed, saying, " I think
the USDA forecast will be very close to
where we end up, which would equate
to an ending-stocks-to-use ratio of 2.6%. "
The stocks-to-use ratio for 2019-20 was
13.3%.
As with corn, export demand has fueled the advance in soybean futures. As
of April 1, 58% of all US soybean sales in
2020-21 have been to China.
Mr. Harris saw continued strong China
buying ahead.
" We expect levels to stay higher than recent years but not quite to the same level
in the year that is ending, " Mr. Harris said.
" ASF and lower Chinese crushing margins along with record soybean production out of Brazil will be the drivers here. "
Mr. Meyers added, " They're likely to increase their imports in total, and the United States will pick up a portion of that. "
Both Mr. Harris and Mr. Meyers said
farmers will plant more than the 87.6 million acres suggested by the USDA's producer survey.
Mr. Meyers said he expected soybean
plantings to be around 90 million acres,
and Mr. Harris said he expected soybean
acres to be at least 1 million acres above
the USDA forecast.
Drought conditions across the northern
Plains at this point have affected spring
wheat more than corn or soybeans, Mr.
Meyers added.
" The market is mildly concerned, but I
think there's enough time for some additional moisture to improve planting conditions for all crops, " he said.
Market drivers for soybeans in the next
few months will be how aggressive China's soybean purchases prove to be, even
though Brazil will be the major supplier
for the next few months, and US spring
weather, Mr. Meyers and Mr. Harris said.
" Weather will be the key here, and we
would look for the November soybean
contract to range between $11.75 and
$13.50 a bu until we get through the 'pod
set' stage in early August, " Mr. Harris said.
Mr. Meyers selected July soybeans
as his reference and said he expected in
the next few months for that contract to
range between $13.50 and $14.25 a bu. MBN

Milling & Baking News

- Jay Sjerven

bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - April 20, 2021

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