WASHINGTON, DC, US — The February World Agricultural Supply and Demand Estimates report’s reputation for minimal adjustments held true for another year, although there were some key global data for soybeans. 

The US Department of Agriculture’s latest supply-demand estimate for US and global agricultural commodities increased domestic soybean crushings and reduced carryover, increased soybean oil production and ending stocks, and increased domestic wheat ending stocks but contained no changes to the outlook for corn. 

The USDA in its Feb. 9 WASDE report forecast 2021-22 US soybean crushings at 2.215 billion bushels, up 25 million from January’s estimate and up 3% from 2.141 billion bushels in 2020-21. The USDA attributed the changes to “favorable crush margins and improving prospects for soybean meal exports.” The carryover of US soybeans on Sept. 1, 2022, was forecast at 325 million bushels, down 25 million bushels, or 7%, from January’s estimate, but up 68 million bushels, or 26%, from 257 million bushels in 2021. 

Increased domestic soybean crushing and lower ending stock figures made sense, said Brian Harris, executive director and owner, Global Risk Management, Tampa, Fla., in an interview with Milling & Baking News, a sister publication of World Grain.  But standing out to him was the absence of adjustments to estimated US soybean exports. 

“What’s not being put in the equation, clearly, is the USDA will have to ratchet exports up at some point given the shortfalls in South America,” he said. “There is little doubt US export business is going to pick up this spring, given the lack of production in Brazil and Argentina. Today’s changes were in the right direction as far as what was absolutely needed, but there is still more work to do when it comes to that export side on soybeans. For the 325 million bushel ending stocks number that they gave us today, the reality is probably close to 300 million bushels with what we know right now.”

In the global soybean outlook, the USDA forecast lower production, crushings, exports and carryout. Global soybean production was reduced 8.7 million tonnes, or 2%, to 363.9 million tonnes to reflect lower production due to drought in South American export competitors. In particular, soybean production was lowered 5 million tonnes in Brazil to 134 million, lowered 2.2 million tonnes in Paraguay to 6.3 million, and lowered 1.5 million tonnes in Argentina to 45 million. For all three countries, exports and crushing estimates were lowered.

“The USDA is basically slow-walking us toward reality,” Harris said. “The production figures for Brazil and Argentina are still much higher than what’s being traded. As an example, Brazilian soybean production at 134 million tonnes per their number today. The reality is somewhere between 125 million and 130 million tonnes. If you applied the same methodology to Argentina, USDA indicated 45 million tonnes; the reality’s somewhere between 40 million and 42 million tonnes right now. So, the numbers are still higher than where most people think production will be.”

Market participants would be wise to view the global soybean complex with an eye to soybean crop cycles in competing export countries, Harris said. 

“From the USDA’s perspective, we’re not anywhere near done with Argentina,” he said. “February and early March is when the crop is made in Argentina, so if for some reason in the next 10 days or so the water spigot turns on, they could still have a pretty good crop. The USDA wants to stay conservative and not overplay their hand, so the numbers the market’s trading and USDA’s numbers are two different things right now.” 

In the case of US soybean oil, the USDA raised its forecast for carryover stocks on Oct. 1, 2022, by 160 million pounds, or 8%, to 2.076 billion pounds, which would be down 55 million pounds, or 3%, from 2.131 billion pounds carried over in 2021. The carryover was within a range of 2 billion to 2.2 billion estimated by Harris.

“That comes from that higher crush number, which means more oil production,” Harris said. “But there was a partial offset there that they needed to do, they raised the food, feed and industrial use number by 135 million pounds, so you take an increase of 295 million pounds of production and then you take 135 million pounds right back out of it. At 2.076 billion pounds, I don’t have any arguments.”

Meanwhile, the USDA’s adjustments to wheat estimates were slight. US food use of wheat in 2021-22 was lowered 3 million bushels, or 0.3%, to 959 million bushels, and seed use was lowered 2 million bushels, or 3%, to 64 million bushels. Perhaps the most notable change in wheat was a 15-million-bushel reduction in exports to 810 million bushels, a 1.8% decline from January as the result of a 10-million-bushel reduction in hard red winter exports and a 5-million-bushel reduction in white wheat exports. Together, these changes equated to a 20-million-bushel increase in estimated carryover of US wheat on June 1, 2022, to 648 million bushels. 

“You could look at that and say it looks a little negative, but it’s not really,” Harris said. “Last year, we were at 845 million bus, so any way you cut it, we’re 200 million bus lighter. The US Southern Plains is still very dry. The onus is on the weather at this point, to get into spring when this crop comes out of dormancy, we are going to have to have regular rains to achieve trendline yields, and everyone knows that, so it’s keeping a floor under wheat prices. 

“The rallies in (soy)beans and corn have certainly been supportive to wheat as well, but what everyone’s really looking at, other than Russia-Ukraine, is a second year of drought in the US Southern Plains if we don’t get timely rains and we have another sub-par crop, and we go down, stocks-wise, for a third year in a row, what should wheat prices really be. That’s really kind of the mentality of the trade, so directionally everything they did today we would certainly agree with, but it’s just the slow walk that has people saying ‘whatever.’”

Wheat, corn and soy complex futures closed higher after the WASDE’s release mid-day Feb. 9. The fact that soybeans and soymeal set new contract highs in the morning, pre-report, was notable, Harris said.

“That’s telling us that at this point we’re doing what we can to meet what the trade is perceiving, but we’re not fully ready or committed to bringing numbers down to where the trade thinks they’ll be,” he said.