Lang
US corn and soybean supply and demand balances saw no changes for the second consecutive month, despite expectations of higher corn exports and reduced domestic soybean use.
With the USDA's World Agricultural Supply and Demand Estimates (WASDE) report released on 11 March showing little change, Arlan Suderman, chief commodities economist at StoneX, discussed issues extending beyond the numbers.
Do you think the USDA is finding it difficult to raise export forecasts for corn, soybeans and wheat for the 2024-2025 season?
Suderman: Yes, I think there's difficulty because of the trade war. The USDA made clear in the preamble to its report that it does not assume any tariffs beyond those currently in place. Since tariffs on Canada and Mexico were not imposed before 2 April, they were not factored into the report. That's hard for me to believe, because if that were truly the case, US corn exports should have been raised in this report by at least 75 million bushels.
Will this trade war, higher tariffs, financial market liquidations and slowing economic growth affect grain demand?
Suderman: In theory, the impact shouldn't be large, or it should be limited. But markets tend to act on expectations, and in markets, perception is reality. I think that's one of the big reasons behind the recent wave of market liquidation. That said, if you look at today's report, it carries a bearish outlook for corn and soybeans.
Recall a month ago, when the February report came out and we discussed the market's disappointment that the USDA hadn't adjusted the figures, which triggered selling. Today, the same thing didn't happen, and I think that's because many speculative positions have already been liquidated, and that's already been reflected in prices.
Is there enough capacity at ethanol plants to offset potential export losses due to tariffs?
Suderman: Yes, current demand is in line with available production capacity. I've been asked about using ethanol as aviation fuel, or about adopting year-round use of E15 ethanol, which Washington is currently working on. This will take a long time, because E15 represents a 50% increase over E10. Some studies suggest that optimal vehicle efficiency is achieved using blends ranging from E23 to E30. Brazil, for example, uses roughly E28.
But overall, we currently have sufficient production capacity, and we're producing close to that capacity. We could expand somewhat if demand starts to rise.
With the possibility of tariffs being imposed on Chinese used cooking oil in April, and Chinese tariffs on Canadian rapeseed oil, will US biofuel producers shift toward canola oil instead of soybean oil, or will they continue to favour used cooking oil? And what's the outlook for soybean oil prices?
Suderman: 55% of used cooking oil comes from China, and I think tariffs will halt that completely, pushing producers to look for alternatives like canola oil. We saw a sharp drop in canola oil prices after China imposed tariffs on Canada, but Canada also won't be able to export oil to the United States if we impose tariffs on it.
Industry players don't know from day to day what feedstock they'll be using, and this creates a great deal of uncertainty. Matters are further complicated at a time when about 45% of production capacity has been shut down.
So the outlook doesn't look good for Chinese used cooking oil, nor for Canadian canola oil, given the current trajectory.
What are your estimates for soybean exports to China for the rest of the year?
Suderman: I think they'll be limited. As of the last report, there are about 1.4 million metric tonnes (roughly 55 million bushels) on the books. And we know about 400,000 tonnes of that is already en route to China.
That leaves about 1 million metric tonnes (roughly 37 million bushels) that China could potentially cancel. They might buy it later this year or push it into next year.
I expect China will cancel some shipments, but I don't know whether it will be just a few shipments or the whole amount. China does this from time to time as a form of market manipulation and to send signals.
This won't have a major impact on the supply and demand balance, but the more important question concerns the upcoming marketing season. This year's Brazilian crop stands at 168 million metric tonnes, up 19 million tonnes from our estimates for last year. China bought a little over 22 million tonnes last year, and Brazil increased its production by roughly the same amount. That's the trend we're on.
The USDA estimated at its Agricultural Outlook Forum that 2025 corn acreage will be 93.6 million acres (up 3.4 million from last year), and soybean acreage will be 84 million acres (down 3.1 million from 2024). Do you agree with these estimates?
Suderman: Honestly, those figures are quite close to my own forecasts, and that worries me, because the USDA hasn't conducted any field surveys. I always say I don't trust the acreage figures the USDA releases at the Outlook Forum, because they're based purely on models, and that's often not accurate.
We're now gathering more data, and I hope to update my estimates soon. I expect to raise my corn acreage forecast and lower my soybean forecast. The only question is how much adjustment is needed.
I don't think we'll lose much soybean acreage relative to what we gain in corn, because in some parts of the southwestern Midwest and the South, we might actually see an increase in soybean planting.
I expect we'll lose more cotton acreage than some people think, and that acreage will shift to other crops depending on the region: some will go to corn, some to rice, some to soybeans, or to double-cropping (soybeans plus wheat).
I also expect increased corn planting in the Northern Plains, along with the emergence of some alternative crops there. In Kansas, for example, we'll see more corn and significantly less sorghum.