USDA Continues Haircut to South American Production

Dry conditions in South America continue to damage crop potential.
Dry conditions in South America continue to damage crop potential.
(AgWeb)

Dry conditions in South America continue to damage crop potential. In its Feb. 9 Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, USDA lowered soybean production in Brazil and Argentina, as well as corn production in Brazil.

AgriTalk's Chip Flory and Davis Michaelsen discuss the February WASDE report:

Global soybean production is reduced 8.7 million tons to 363.9 million due to the drought in South America.
USDA’s current estimates include:

  • Brazil’s soybean crop is 134 million tons, down 5 million from January.
  • Argentina’s soybean crop is 54 million tons, 1.5 million lower from January.
  • Paraguay’s soybean crop is 6.3 million tons, down 2.2 million from January.

“They kept the numbers well above private trade estimates,” says Bill Biedermanm, hedging strategist with AgMarket.net. “Historically USDA seems to be cautious about making big adjustments until we are closer to harvest.”

If USDA would have gone below 130 million tons in Brazil or 42 million tons in Argentina for soybeans, he says, the tight soybean situation would lead to a major shift to soybeans in the U.S.

Global soybean ending stocks are reduced 2.4 million tons to 92.8 million. 

“They will have to keep lowering that supply number, but that demand number will be more difficult to lower, which will tighten up stocks,” Biedermanm says.

Domestically, USDA’s 2021/22 U.S. soybean outlook is for increased soybean crush and lower ending stocks. Soybean crush is forecast at 2.215 billion bushels, up 25 million from last month on favorable crush margins and improving prospects for soybean meal exports. 

Soybean meal exports are reduced for Argentina, Brazil, and Paraguay as drought-reduced crops limit crush prospects. With soybean exports unchanged, ending stocks are reduced 25 million bushels to 325 million.

The U.S. season-average soybean price for 2021/22 is forecast at $13 per bushel, up 40¢ from last month partly reflecting the impact of drought in South America. The soybean meal price is forecast at $410 per short ton, up $35. The soybean oil price forecast is raised 1¢ to 66¢ cents per pound.

For corn, USDA left the U.S. balance sheet unchanged and the season-average farm price at $5.45 per bushel.
Global coarse grain production for 2021/22 is projected 2.7 million tons lower to 1,497.4 million. This month’s foreign coarse grain outlook is for lower production and consumption, and smaller ending stocks relative to last month. 

Brazil’s corn crop is projected at 114 million tons, 1 million less than last month, with Argentina at 54 million tons, unchanged from January. Paraguay’s corn production estimate is also down due to extreme heat and dryness.

Corn is more fundamentally strong than soybeans,” Biedermanm says. 

For wheat, USDA is expecting stable supplies, lower domestic use, reduced exports, and higher ending stocks.
The projected season-average farm price is raised $0.15 per bushel to $7.30. This would be the highest season-average farm price since 2012/13. 

The global wheat outlook for 2021/22 is for lower supplies, higher consumption, increased trade and reduced ending stocks. Supplies are projected falling by 1.1 million tons to 1,066.3 million as reduced production more than offsets higher beginning stocks. The majority of production decreases are in the Middle East, where both Iraq and Syria are reduced due to the prolonged dry conditions. 

 

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