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Column: U.S. soybean exports closer to USDA targets than corn

FORT COLLINS, Colo. (Reuters) - There are fewer than eight weeks left in the 2019-20 U.S. marketing year, and soybean exports appear more likely to meet the U.S. government’s full-year prediction than those for corn.

Farmer Dave Walton holds soybeans in Wilton, Iowa, U.S. May 22, 2019. REUTERS/Kia Johnson

U.S. corn and soybean exports are seen hitting seven- and six-year lows in 2019-20, respectively, though the exact outcome will be important for setting the starting supply levels for 2020-21, which begins on Sept. 1.

The U.S. Department of Agriculture will publish its next monthly supply and demand report on Friday at noon EDT (1600 GMT), and U.S. corn and soybean inventories are in for some changes following the agency’s quarterly stocks and acreage reports from June 30.

Exports are relatively trackable, so they do not usually drive surprises in quarterly stocks like the one observed a week ago for corn. However, corn exports may be subject to a reduction on Friday based on the latest data, though that is less probable in the case of soybeans.

SOYBEANS ON TRACK?

The United States exported 1.97 million tonnes of soybeans in May, the smallest volume for any month since June 2017, according to data published on Thursday by the U.S. Census Bureau.

Only 164,218 tonnes or 8% of the total were to China, the lowest monthly volume to the leading global buyer since December 2018. May shipments to all other buyers totaled 1.8 million tonnes, the second-largest volume for the month in recent history behind 2018’s trade war-driven anomaly.

Export inspections data places June soybean exports in the vicinity of 1.8 million tonnes, and about 15% of that was to China.

Using the June assumptions would place 2019-20 soybean exports through 10 months at 38.9 million tonnes or 1.43 billion bushels, down half a percent from the same period a year earlier but 24% below two years ago.

As of June 25, the United States had sold 45.04 million tonnes of soybeans for export in 2019-20, more than USDA’s marketing-year export prediction of 44.9 million tonnes (1.65 billion bushels).

USDA announced on Monday that China had purchased 264,000 tonnes of soybeans for delivery in 2019-20. That means more than enough soybeans have been sold to reach USDA’s prediction, and that is probably a requirement to simply meet the target.

A small amount of the total annual sales is usually rolled over to the next marketing year, a couple percent at most. Some of those sales get shipped and counted in the next year’s tally, but some are cancelled, so it is best to have a small sales cushion in place to avoid falling short of the forecast.

CORN SALES SHORT

U.S. corn shipments got off to a very slow start in 2019-20, but the second half of the year has been more promising. May exports totaled 5.7 million tonnes, the second-largest May total on record and the most for any month since August 2018.

June inspections suggest last month’s corn exports around 5.3 million tonnes, which would bring September-through-June shipments to about 36.5 million tonnes or 1.44 billion bushels. That would be down more than 20% on the year.

Given USDA’s 2019-20 export target of 45.1 million tonnes or 1.775 billion bushels, that means July and August shipments would have to total around 4.3 million tonnes each, which is slightly below the recent average.

But sales are short. As of June 25, old-crop corn export bookings totaled 42.3 million tonnes, some 2.8 million short of USDA’s full-year projection. Within the last five years, sales after June 25 reached 2.8 million tonnes in 2016 and 2018, both South American drought years, and those sales were less than 3 million.

In the other three years, corn sales for that period average 1.2 million tonnes. Considering the relatively large amount of unsold corn and potential rollover sales, USDA’s 2019-20 export estimate may be unreachable.

STOCK IMPLICATIONS

Last month, USDA pegged U.S. corn stocks to rise more than 50% over the next year to 33-year highs, but that will change on Friday after USDA’s June acreage report revealed a shockingly small planted corn area.

That new area number should bring projected 2020-21 U.S. corn ending stocks well below the June estimate of 3.323 billion bushels. Analysts’ average guess for Friday’s report is 2.683 billion bushels, which would still be a 33-year high but up only 18% from their 2019-20 estimate.

Along with the new acres, analysts likely considered the bearish quarterly stocks surprise, as USDA placed June 1 corn supply some 273 million bushels above market expectations. It is uncertain whether a potential reduction in either exports or other fourth-quarter demand is also reflected in the average trade estimate for 2020-21 carryout, but that is more likely the case for those guesses on the higher end of the range that extends to 3.01 billion bushels.

In terms of psychological supply levels, “3” seems to be the new “2” when it comes to the lead number on 2020-21 U.S. corn ending stocks. Market bulls are more likely to feel like things are on the right track if the projection is well below 3 billion bushels. In prior years, bulls were often roused when inventories were predicted to fall short of 2 billion bushels.

On the other hand, U.S. soybean ending stocks for 2020-21 are seen down more than 50% from 2018-19’s record, which largely resulted from the trade war with China. June 1 soybean stocks came in as analysts predicted, and they peg new-crop carryout at 416 million bushels for Friday’s report, up from 395 million last month.

The opinions expressed here are those of the author, a market analyst for Reuters.

Editing by Matthew Lewis

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