The following is a condensed version of AEI Premium content. You can read the original posts here and here. Not a subscriber yet? Get started with a free trial.
September 1 marked the beginning of the 2020/21 marketing year for corn and soybeans, and with the new marketing year comes new optimism. In this week’s post, we unpack the latest corn and soybean export data and the potential implications.
Before diving in, it is important to define two USDA terms. “Sales” are commodities sold but not exported (or delivered). Sales are subject to potential cancelation, especially if the economics or geopolitical environment significantly shift. The second term is “exports,” which means the product was loaded and shipped to the buyer.
Finally, we use the term “early sales” throughout this post. With this, we are referring to sales reported before the marketing year begins.
Figure 1 shows total early corn export sales over the last two decades. For the 2020/21 marketing year, early export purchases of corn were a record 732 million bushels. This is certainly good news, and much improved from the pace last year, less than 300 million bushels.
Soybeans, which have captured much of the attention, have also set a record for early export sales (Figure 2). At 1.1 billion bushels, early sales for the 2020/21 marketing year are well above previous records, and much improved from the 331 million bushels of early export sales last year.
While the uptick in activity is good news, keep in mind exports are much more significant for soybeans. For example, the September WASDE report estimated exports would account for 48% of total soybean use, but only 16% of total corn use.
Figure 1. Early U.S. Corn Export Sales (total); Before Marketing Year Begins. Data Source: USDA FAS, aei.ag calculations (data as of September 13, 2020).
Figure 2. Early U.S. Soybean Export Sales (total); Before Marketing Year Begins. Data Source: USDA FAS, aei.ag calculations (data as of September 13, 2020).
All eyes have been on China. With the Phase 1 agreement, there was hope that China’s purchase activity would – at a minimum – return to pre-trade war levels. While China’s purchases through this summer were disappointing, the seasonality of soybean purchases was an important consideration.
Figure 3 shows the early corn purchases made by China. At nearly 350 million bushels, China’s activity is notable for two reasons. First, the purchases are record highs, nearly tripling the previous 2013/14 highs. Second, it’s the first significant early purchase of corn in seven years. For 2020, China has accounted for almost half (47%) of the total early corn export sales.
Figure 4 shows the early soybean export sales made to China. At nearly 570 million bushels, this is also a record amount of activity. Furthermore, the pace of purchases is well above the trade war levels of less than 50 million bushels.
Figure 3. Early U.S. Soybean Export Sales (to China); Before Marketing Year Begins. Data Source: USDA FAS, aei.ag calculations (data as of September 13, 2020).
Figure 4. Early U.S. Soybean Export Sales (to China); Before Marketing Year Begins. Data Source: USDA FAS, aei.ag calculations (data as of September 13, 2020).
Total Corn and Soybean Exports, Big Expectations
While the uptick in early export sales is encouraging, it’s important to realize the USDA’s usage projections already have strong exports factored in. Corn exports, which have fallen in recent years, are expected to rebound strongly in 2020/21 (Figure 5). Even with a 32% increase over last year’s activity, exports are expected to remain below 2017/18 levels.
The situation is similar for soybeans (Figure 6). After sharply declining during the trade war, current expectations are for a return to pre-trade war levels.
Figure 5. Total Corn Exports, early sales (in orange), and non-early sales (in blue). Data Source: USDA FAS, aei.ag calculations (data as of September 13, 2020).
Figure 6. Total Soybean Exports, early sales (in orange), and non-early sales (in blue). Data Source: USDA FAS, aei.ag calculations (data as of September 13, 2020).
Wrapping it Up
The uptick in early export sales of corn and soybeans is a positive story for U.S. agriculture. After two years of decline – even as ending stocks expanded – the export prospects are encouraging.
All signs point to China returning as a significant buyer of U.S. soybeans. A new development has been China’s early corn purchases. While many will ponder if China is going to meet the Phase 1 commitments, don’t miss the forest for the trees. The most relevant thread from these data is that China is positioned to return as a significant buyer, a welcome improvement from the trade war stalemate.
Finally, the implication of record early export sales might be less significant for 2020/21 than first meets the eye. For both corn and soybeans, the USDA already estimates a strong recovery in total exports for the marketing year. In other words, the early export sales data is mostly confirming the USDA’s initial and current estimates.
While a lot can happen throughout the 2020/21 marketing year, exports are off with a strong start.