USDA kicks can down the road on carryouts, analyst says

USDA remains stubborn in not raising exports faster, analyst says.

It’s getting more fun to write this column every week. This week’s headline, "Corn at New Highs – Again" is basically the same headline as last week.  

Fun, fun, fun! At least for grain producers. Livestock feeders and ethanol plants might beg to differ.

The twin combination of adverse weather in South America (SAM) in December and into mid-January along with Chinese demand for corn, wheat, and soybeans has ignited a poweder keg that is still blowing markets apart this week with new highs again in the corn market. Corn is approaching $6 – almost twice the price we had in August! It’s truly a great time to be a grain producer.  

Weather forecasts continue to forecast decent weather for Brazil the next two weeks, with below-normal temps and normal precip, but Argentina is a bit less than ideal the next two weeks with below-normal precip and normal to above-normal temps. Still, the weather has improved since mid-January for SAM, as most of the dramatically lower production estimates have gone away.  

USDA once again disappointed the trade in its February numbers, choosing to leave all SAM production numbers unchanged from last month (both soys and corn) despite problems during a dry December/Janauary.  Expectations were for a reduction for Brazil and Argentina, with Brazil corn guesses at 108.4 mmt (vs. 109 actual) and soys 132.4 mmt (vs. 133 actual).  Argentina guesses are 47 mmt corn (48 actual) and 47.6 mmt soys (vs. 48 actual).  
U.S. corn carryout was estimated at 1,392 mb (vs. 1,502 Feb, a 50 mb reduction), soy 123 mb (vs. 120 actual, a 20 mb reduction), and wheat 834 mb (vs. 826 actual). World numbers were also expected to be cut to 279.8 
mmt corn (vs. 286.5 actual, a 2.7 mmt rise), soy 83.3 mmt (vs. 83.4 actual Feb), and wheat 312.8 mmt (vs. 304.2 actual Feb).  

To step back a bit, in agriculture, we have yesterday’s USDA report as little changes, with just another step closer to reflecting the shortages the market has already recognized in price movement – but USDA will likely continue to deny for months more. It remains quite stubborn in not raising exports faster, and thus lowering carryout to where the market thinks it actually will be. The fact is the U.S. has virtually zero soybean carryout and likely less than 1 billion bushels of corn carryout based on current export demand, even while USDA dreams of piles of grain. With USDA kicking the can down the road even further, that means prices can continue to roll higher until we allocate our short supplies.    

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Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is president of Progressive Ag Marketing, Inc., a top-ranked marketing firm in the country.  

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