USDA’s forum was not optimistic about US acreage of corn in 2021

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         Porto Alegre, February 23, 2021 – The USDA’s traditional forum, held in the third week of February, again aborted all local agribusiness and brought its short- and long-term projections for a global outlook. Usually, the data pointed in the forum slightly diverge from those reported monthly by the agency responsible for adjusting the supply and demand information for commodities in USDA.

         The surprise of this report is that the information is betting on a strong increase in the soybean area in the United States in 2021, contrasting with no increase or just a slight increase in corn. Clearly, the appeal for area in the soybean complex is much higher this year due to the composition of current stocks and the need for a record crop. Perhaps, this picture is compromising a potential increase in the corn area in 2021, which does not seem to be the consensus in both the soybean and corn markets. In fact, the first planting intention report and faithful data on the planting trend will only be released on March 31. Thereafter, the effective 2021 US crop begins.

         The data from the USDA’s forum last week cannot be fully used to explain the presence of the local and global corn markets and their trends. One of the pieces of data that was far from reality and released at the forum is the projection of imports by China.

         The report is forecasting Chinese imports of only 7.2 million tons in 2021, while the monthly supply and demand report points to 24 million tons. The projection for the next 10 years is also not conclusive by keeping this low number of 7 million tons of imports a year in the period. In the case of China as the new major international variable in the corn market, the stagnant projection was not very compatible with the reality of global trade.

         However, the forum produced an increasing projection for US corn exports and slow growth in domestic ethanol consumption. This seems natural since the global demand grows at least 130 million tons in each five-year period and the trade flow really tends to keep rising. The question is only about this condition of Chinese demand, which really has projections of strong expansion by the private sector, while the forum was shy in its expectations. Could China boost its corn production in the next few years to the point of being less dependent on imports? This is a relevant question for the coming few years as it can sharply change the flow of the global corn trade. Besides, the projections disregard new price highs in oil for the next ten years, with consequent highs in biofuels and greater demand in the latter segment.

          However, the point that drew the most attention, for revealing a concern with 2021, was the forecast of the area to be planted in the next US crop. In its statistics, the forum released a forecast of 90 million acres for corn and 89 million acres for soybeans. The corn area would decline by 0.80 thousand acres, and soybeans would grow by 6 million acres. The numbers may seem bearish for soybeans, but they are not and reflect all the concern and tension with this 2021 crop. Current soybean stocks are very low at 3.2 million tons. The United States needs a full crop in 2021. The suggestion of a strong increase in the area slightly alleviates more bullish expectations.

         On the other hand, an area of 89 million acres could produce 123.5 million tons or up to 124.50 million in case of more favorable productivity. A record production. If demand remains steady in 2021/22, and there is nothing to indicate otherwise, even with strong exports to China, stocks in the United States could get close to that of 2022 (in August), between 4 and 6 million tons, which is still too tight to balance the global market. This could only generate more stocks with cuts in exports, which would ultimately lead to more sales from South America.

         So, the strong appeal for area is undoubtedly coming from soybeans, because without increasing the area this need for containing demand and exports is obvious. As there is not much room for strong area growth, a greater increase in soybeans compromises a stronger increase in corn. And in its projection for 2021, the forum surprised with a smaller area to be planted. Even though it is not an official number from USDA and does not reveal a direct report resulting from the research on intentions, the number of 90 million acres causes a certain future concern.

         With 90 million acres, the United States could produce 370 million tons in a normal crop, with the final stocks dropping from the current 38 to 30 million tons next year, maintaining demand with few corrections. If the area grows little, to 92 million acres, production could hit 377 million tons, and the final stocks would be 35 million tons, that is, still below the current stocks.

         USDA will only disclose its actual planting intent report for the US crop on March 31. The two pictures for supply and demand are adjusted, being a little more problematic in the case of soybeans. The area appeal is more consistent for soybeans. So, a larger area of soybeans will be a pressuring point for them, but supportive for corn. A larger area of corn, 94/95 million acres, and a small growth in soybeans, 85/86 million acres, could trigger sharp highs for soybeans for the 21/22 season and force export rationing to China.

         Agência SAFRAS Latam

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