Re USDA Ag Outlook Forum
I realize there aren’t many fans of the USDA out there (for good reason) but they do have the final say that the trade relies on. As such, it is worth considering what they presented on Thursday and Friday (Feb 20/21) at their Ag Outlook Forum. It was their first real look at the 2020/2021 crop year.
Of particular importance to canola was the soybean and soybean oil estimates. Even though they expect almost 9 mil ac more soybeans to be planted this year, with the sharp reduction in old crop carryover (so new crop beginning stocks) and an increase in exports, 20/21 ending stocks are only forecast to be 320 mil bu. Compared to 909 mil bu in 18/19, one can see how the market will be much more sensitive to any sort of weather issues than over the past few years.
That would actually fall to 235 mil bu if soybean exports returned to the 2017/18 level (that is supposed to be the reference point for Chinese imports to increase from).
The other issue could be yield. The USDA used 49.8 bu/ac compared to 47.4 in 19/20 and 50.6 the year before. Should yield equal last year with all other estimates unchanged, the carryover would decline to 120 mil bu. That would come close to the 13/14 ending stocks of 92 mil bu that resulted in soybean record high prices of $17.89/bu US.
I am not suggesting such an outcome but it illustrates why the market will be so sensitive to weather.
Regarding soybean oil, they pegged ending stocks at 1.55 bil lbs vs 1.515 bil lbs at the end of 19/20. This is important because they assume exports will have to be cut by 300 mil lbs to maintain that level of stocks. It is also 843 mil lbs below the exports of 17/18 (that are again the reference point for China).
In short, should the USDA’s outlook come true, soybeans and soybean oil have the greatest potential for a significant rally this year – obviously opening the potential for canola as well.
I realize there aren’t many fans of the USDA out there (for good reason) but they do have the final say that the trade relies on. As such, it is worth considering what they presented on Thursday and Friday (Feb 20/21) at their Ag Outlook Forum. It was their first real look at the 2020/2021 crop year.
Of particular importance to canola was the soybean and soybean oil estimates. Even though they expect almost 9 mil ac more soybeans to be planted this year, with the sharp reduction in old crop carryover (so new crop beginning stocks) and an increase in exports, 20/21 ending stocks are only forecast to be 320 mil bu. Compared to 909 mil bu in 18/19, one can see how the market will be much more sensitive to any sort of weather issues than over the past few years.
That would actually fall to 235 mil bu if soybean exports returned to the 2017/18 level (that is supposed to be the reference point for Chinese imports to increase from).
The other issue could be yield. The USDA used 49.8 bu/ac compared to 47.4 in 19/20 and 50.6 the year before. Should yield equal last year with all other estimates unchanged, the carryover would decline to 120 mil bu. That would come close to the 13/14 ending stocks of 92 mil bu that resulted in soybean record high prices of $17.89/bu US.
I am not suggesting such an outcome but it illustrates why the market will be so sensitive to weather.
Regarding soybean oil, they pegged ending stocks at 1.55 bil lbs vs 1.515 bil lbs at the end of 19/20. This is important because they assume exports will have to be cut by 300 mil lbs to maintain that level of stocks. It is also 843 mil lbs below the exports of 17/18 (that are again the reference point for China).
In short, should the USDA’s outlook come true, soybeans and soybean oil have the greatest potential for a significant rally this year – obviously opening the potential for canola as well.
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