May WASDE Shows $7 Corn Hasn't Dampened Demand; Here's What to Watch with New Crop
May 12, 2021
USDA's first look at new crop in the May World Agricultural Supply and Demand Estimates (WASDE) indicates higher crop prices could start to erode demand, but that hasn't been the case yet. The WASDE report forecasts total corn use in 2021/2022 to decline compared with a year ago. However, USDA points out greater domestic use could help offset lower exports. USDA is also calling for increased ethanol usage.
"The number one takeaway for me is that higher prices and corn has not done enough to slow down demand," AgriTalk host Chip Flory told Clinton Griffiths. "USDA added 100 million bushels to the corn export estimate, which took it up to 2.775 billion bushels, and that's with old crop corn futures above $7. We need to keep in mind that as we look forward into the 2021/2022 marketing year, what has happened in the old crop marketing year, tells us that the market needs to work harder to to slow down demand. USDA is showing us a new crop carryover projection on corn at 1.5 billion bushels. But boy, that can change a lot based on on the amount of demand that could come into the market, because the new crop markets haven't done nearly as much as the old crop to try to manage that demand side of the trade.
In Wednesday's report, USDA showed the 2021/2022 corn crop is projected to reach 15 billion bushels, which is 1 billion bushels more than last year. That averages out to slightly more than 91 million acres. With a yield of 179.5 bu. per acre, that would be 7.5 bu. above last year.
As for soybeans, USDA is forecasting a 4.4 billion bushel crop, which is up 270 million bushels from last year. The estimate is based on 87 million soybean acres getting planted and a national average yield of 50.8 bu. per acre. USDA also expects lower supplies based on lower exports but higher crush estimates.
"I don't think there's any surprise if you take the trendline yield and the prospective planting estimates on soybean plantings — the crop came in right at what would have been projected by that," "We just need to figure out what the usage is going to be, and, of course, what the actual yield, not the projected yield, is going to be."
USDA also made adjustments to the South American crop, as dryness continues to plague the second corn crop in Brazil.
"After the report, I went straight to the world corn production numbers because I was curious where USDA was going to put the Brazilian second crop corn production," says Ben Brown, University of Missouri economist. "We've seen them have significant stress in that crop over the last couple months, but it's been growing, especially now that we've hit kind of the end of their rainy season. Private estimates in Brazil have certainly been showing they're expecting corn production to be somewhere in the mid to upper 90s. In terms of 90 million metric tons of corn production, USDA lowered their corn export numbers 7 million metric tons from their April report. That was about 1 million metric tons below what trade analysts were expecting."