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November 11, 2020 | FBN Insights | Kevin McNew

USDA Surprises Send Markets Higher

Given current pace of exports, USDA may need to adjust those projections higher in the future

USDA Surprises Send Markets Higher

  • While cuts to US production were expected, the market was surprised by the size of the cuts to yields for corn and soybeans.
  • The US corn yield came in at 175.8 bushels per acre, down from 178.4 bushels in October and below the trade expectation at 177.7 bushels.
  • That and a bump of 325 million bushels to exports resulted in ending stocks at 1,702 million bushels - well below expectations at 2,033 million. 
  • The US soybean balance sheet also was a surprise with yield being cut 1.2 bushels per acre versus October and ending stocks at 190 million bushels.
  • The expectation for soybean stocks was at 235 million bushels.
  • The projection for US soybean exports was unchanged at 2,200 million bushels.
  • USDA raised China’s corn imports to 13 million tonnes, but we lean towards a larger volume for the importer.
  • China’s soybean imports were held at 100 million tonnes while USDA added 500,000 tonnes to China’s wheat imports, now at 8 million tonnes.
  • US wheat stocks were little changed, down 6 million bushels to 877 million.
  • World wheat stocks were forecast down 1 million tonnes, but remain record high at 320.5 million tonnes.

FBN’s Take On What It Means: The USDA report was even more bullish than expected, as the agency cut yields much further than expected. Given the current pace of exports, USDA may need to adjust those projections higher in the future. South American weather risk will take on greater importance due to the decrease in US production. Tighter US stocks, especially in beans, will likely continue to support prices. 

China May Seek to Redo Trade Deal

  • Reports from China indicate the country wants to renegotiate the Phase 1 trade deal.
  • China has commited to buying $200 billion in additional US goods above 2017 levels, including $35 billion in agricultural products.
  • China sees the import targets as unrealistic, especially considering the recent pandemic.
  • While imports of soybeans, corn and pork have increased, China is on track to meet just 65% of agricultural purchase targets this year.
  • Chinese customs data showed that in October, China’s trade surplus with the US was 46.5% higher than four years ago.

FBN’s Take On What It Means: A new administration is likely to conduct a strategic review of trade policies to determine which ones are working and which ones are not. US trade experts say it is unlikely Biden can do anything that could be seen as being soft on China given all the tough rhetoric about China during the campaign.   

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