February 1, 2021

Lowered production, yields further tighten soy balance sheet, according to USSEC's WASDE update

The US Soybean Export Council (USSEC) has recently held its monthly World Agricultural Supply and Demand (WASDE) briefing on January 12, featuring Mac Marshall, USSEC vice president of market intelligence, and analyst Nagaraj Meda, managing director of TransGraph Consulting.

USSEC CEO Jim Sutter provided opening remarks, reiterating that USSEC is always available to help its customers through various means such as the WASDE webinar, especially during what he referred to as "interesting and challenging times."

In his report with key revisions to the January soy complex, Marshall revealed that, each January, the US Department of Agriculture (USDA) issues adjustments to the prior year's crop size, incorporating updated information on prevented plantings and yield.

Starting with the US side, Marshall's update showed USDA revising its yield estimate for the 2020 US soybean crop size. The downward revision to production contributed to a reduction in projected 20/21 ending stocks, further tightening an already tight balance sheet. "It comes as no surprise that this marketing year has seen an exceptionally robust pace of US soybean exports," Marshall said.

Thus, one item he was looking for in the January WASDE was to see if USDA would issue an upward revision to its export estimate for US soybeans, which it did, projecting its highest WASDE estimate for US soy exports since November 2017. Increased prices were also reflected in this estimate. Additionally, both soymeal purchasing and domestic use of soybean oil rose.

On the international side, world ending stocks were also revised downwards, driven in part by another downward revision to Argentina's projected output. South America continues to experience dryness in their major growing regions this planting season. USDA did not revise expected production from Brazil in its January report but did provide downward revisions to Argentina and Uruguay's crop sizes. Marshall also noted increases to Chinese demand and production.

Marshall also provided some longer-term perspective on supply and demand for soy. USDA projects Chinese imports to be record high this season. Globally, total consumption is also projected to outpace the 10-year growth trend with most of that incremental growth occurring outside the United States.

Nagaraj Meda, a pioneer in risk management and hedge models, also provided his perspective on the WASDE, reiterating robust Chinese soybean demand and its recovering hog market. He also discussed a bird flu outbreak in India.

"We at US Soy remain committed and positioned to supply and nourish an ever-growing and evolving world," said Marshall.

- USSEC