April 2021 WASDE: Soy Inventories Maintained, but Tight
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The U.S. Soybean Export Council hosted its exclusive World Agricultural Supply and Demand (WASDE) briefing on April 11. The WASDE is a monthly report published by the United States Department of Agriculture (USDA) providing a comprehensive forecast of supply and demand for major crops, both globally and in the United States.
Traders, farmers, and soy processors around the world refer to WASDE as an indicator of where supply and demand, and ultimately the price of soybeans may go. As in months past, Mac Marshall, Vice President of Market Intelligence for USSEC and the United Soybean Board, provided an inside look at what this month’s numbers mean for U.S. Soy.
USSEC CEO Jim Sutter, who opened the briefing, commented that he could not remember a time with as many variables in play.
April Key Revisions
“The first thing I look for in these reports is U.S. carryout,” said Marshall, “which remained unchanged at 3.3 million metric tons (MMT).”
Total use was also unchanged, maintaining a stocks to use ratio of 2.6%, just under 10 days’ use. USDA did increase its export projection from what was already a record 2.25 billion bushels (61.2 MMT) to 2.28 billion bushels (62.1 MMT). Incorporating export sales data from April 8, the U.S. has accumulated exports of 55.2 MMT with another 5.6 MMT in sales not yet exported. The total commitments to date of 60.7 MMT are a record.
To balance some of the increase in exports, USDA revised crush down slightly, resulting in reduced production of soybean oil by 0.05 MMT and soybean meal by 181 thousand metric tons (TMT). The marketing year (Sep-Aug) average price was taken up by 10 cents to $11.25/bushel. Within the derivatives, 0.18 MMT were moved from the biodiesel line to the food/feed/other industrial use line – likely reflecting renewable diesel use – which will be outlined in the balance sheets starting next month. With the surge in domestic demand for soybean oil, USDA increased its price projection by 4 cents/pound to 45 cents per pound.
On the international side, Marshall noted that Brazilian production was increased by 2 MMT to a record 136 MMT and Brazilian soybean exports were revised up by 1 MMT. With the crop more than 80% harvested, the picture of how much volume Brazil can put into the market this season is becoming clearer, although some concerns about moisture levels remain.
Argentine production was maintained at 47.5 MMT. Paraguayan production was revised down by half a million metric tons. Argentine exports were revised down by 150 TMT; Marshall said this is likely attributable to farmers holding onto their crops as a hedge against further devaluation of an already rapidly weakening peso.
China’s crush was revised down by 2 MMT to 96 MMT but overall import volumes held at 100 MMT. Chinese crush margins have eroded considerably in recent weeks, so the reduction is not altogether surprising, Marshall summarized.
With Brazilian production taken up and Chinese utilization revised down, global ending stocks increased by 3.13 MMT to 86.87 MMT.
Lastly, global soybean imports increased, driven by an upward revision of 450 TMT for Egypt’s imports – a market that has seen notable growth in its importation of U.S-origin soybeans.
Regarding trade expectations, Marshall said inventories are being maintained, but remain tight. “Carryout will be very tight and the overall U.S. soybean complex from its fundamentally export oriented with over 60% of aggregated tonnage across whole beans, meal, and oil shipped overseas.”
Market Analyst Insights
Marshall invites a market analyst to the conversation each month. Kevin McNew, chief economist at the Farmers Business Network, was the featured guest for the April webinar.
McNew and Marshall’s wide-ranging conversation touched on a number of topics, beginning with South American crop size. McNew speculated that due to oscillating weather patterns and late planting, the Argentine crop will be below average and lower than USDA estimates. Argentina will keep most of its beans for domestic crush, he said, which could strengthen U.S. crush margins into the summer.
“It’s hard to derail the freight train that is Brazil right now,” McNew continued, saying that the country is consistently increasing its acreage and production area. The economy for beans in Brazil remains solid.
“We don’t look at any of these reports in a vacuum,” said Marshall. For USDA’s Prospective Plantings report, released March 31, the economists agreed that they do not anticipate any huge changes to USDA’s projected U.S. soybean area of 87.6 million acres.
U.S. weather looks favorable so far, McNew said, although he felt that may be some lingering side effects of La Niña in the early part of the growing season. “I won’t say it’s a huge risk at this juncture, but I think it merits some caution and you know with tighter acreage than what we had expected in the case of beans, every bushel is going to count this year.”
Marshall and McNew agreed that new crop pricing is most at risk of going higher and looked at general pricing trends.
While Chinese demand is expected to continue to grow, Marshall noted that USSEC looks at all pockets of global demand, including current level demand and where future demand will be. Egypt, which he mentioned earlier in the briefing, continues to see growing demand from its growing aquaculture and other animal ag industries and Mexico is a major growth market for whole soybeans.
To watch an exclusive encore presentation of USSEC’s April 9 WASDE briefing in its entirety, please click here. To learn more about U.S. Soy, please visit USSOY.org.