Expected bump in corn for ethanol didn’t happen

CHARLOTTE, Mich. — Traders’ expectations of an increase in corn for ethanol didn’t reach fruition, and ending stocks across the board were higher in the Feb. 8 agricultural supply and demand estimates report.

Angie Setzer and Karl Setzer, co-partners at Consus Ag Consulting, hosted a live podcast on X, formerly Twitter, as the U.S. Department of Agriculture’s balance sheet estimates was rolled out.

“We get these numbers out of the way, and I think we’re right back to South American weather and harvest updates for our market direction,” Karl said.

“February numbers, generally not much in the way of a big event. Typically you get the January report which is an update on production, quarterly stocks and a bunch of other things. The February numbers are just kind of a reconciliation further on what we’re seeing from an overall export pace standpoint,” Angie added.

Going into the report, the trade expected a slight increase for U.S. soybean ending stocks. What happened?

Angie: Soybean ending stocks came in at 315 million bushels. That’s quite a bit higher than what traders were anticipating, 35 million bushels above the average trade estimate ahead of the report. There was a 35 million bushels cut in soybean exports that went right to the bottom line. The trade range for soybean ending stocks before the report ranged from 245 million to 310 million.

There were expectations of a drop in corn ending stocks that would primarily be attributed to an increase in corn for ethanol.

Angie: Corn carryout came in 10 million bushels higher than last month at 2.172 billion bushels, about 25 million bushels higher than what traders were anticipating. The trade range on corn ending stocks is 2.065 billion to 2.2 billion. The bulk of that came from a reduction in food, seed and residual use. Everything else was left unchanged. Traders were expecting to see a cut for some reason. I’m still confused where folks thought we would see a cut this month in that. Was it ethanol numbers that they thought they would see bumped up?

Karl: Yes, there was some talk because we’ve been running ahead of our yearly ethanol estimates that we could see a 25 to 50 million bushel bump in the ethanol side, but no dice. I’m a tad bit surprised that was even brought up in the February report. Usually we just kick the February report to the March before we do much.

Angie: We’ll see maybe an adjustment in the March report, but then we’ve got to reconcile that with the quarterly stocks at the end of the month.

Any data of note on the all wheat side of the domestic balance sheet?

Angie: Wheat carryout came in 10 million bushels higher than what traders were expecting at 658 million versus 648 million.

On the global soybean side, there was anticipation of a larger drop in South American production, specifically on Brazil due to weather issues.

Karl: USDA left the Argentina soybean crop steady at 50 million metric tons. The Brazil soybean crop was 156 million. That’s only down 1 million.

Angie: I agree with you on the Brazil number of 156 million. That’s where a lot of the commercials sit. I think Bunge came out yesterday and said they were still in the 150s on a Brazil production standpoint.

Karl: The world soybean ending stocks came in at 116.03 million metric tons, well above what we were expecting at 112.5, and up from 114.6 million. That was a big jump there.

Were the global corn number within the range of expectation?

Karl: Global corn carryover came in at 322.06 million metric ton. The average trade estimate was 324 million. It was 325.2 million in January. There was a pretty good size drop there, but it’s still not to a level that I think is going to shake this market.

Angie: They left Argentine corn unchanged and cut Brazil by 3 million metric tons down to 124 million.