The Agriculture Department lowered its estimate of already tight ending stocks for soybeans as USDA increased its estimate of how much of the 2020 crop would be crushed. 

The forecast for soybean ending stocks was reduced 15 million bushels to 175 million bushels in the December World Agriculture Supply Demand Estimates report. The November estimate was 190 million bushels. Ending stocks for the 2019 crop wound up at 523 million bushels. 

Mike Lung of Allendale Inc. said traders were expecting to see the number drop to 163 million bushels.

USDA "left exports unchanged which were expected to be a little bit tweaked,” Lung told Agri-Pulse. He said traders thought increasing exports to China would be factored in the drop in ending stocks.

New crop soybean or 2020/21 exports were unchanged from 2.2 billion bushels in November.

John Newton, chief economist for the American Farm Bureau Federation said the increase in soybean crushing, which rose from 2.18 billion last month to 2.195 billion in December resulted in the lower estimate of ending stocks.

“That helped to reduce ending stocks slightly and bump the (average farm) price up to $10.55 a bushel which is roughly $2 above last year,” told Agri-Pulse. The average farm price was $8.57 a bushel a year ago.

Corn ending stocks were unchanged from last month at 1.7 billion bushels. However, the estimate for U.S. wheat stocks was lowered from 877 million bushels last month to 862 million bushels. Newton said most stocks are getting tighter globally, too.

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“Global corn stocks came down, global soybeans stocks came down, global cotton stocks also came down. We’re moving into a much tighter environment, and when you take China out of the equation, it's even much tighter than that,” Newton noted.

With most December WASDE numbers going unadjusted, Newton said USDA will update crop size in its January report and likely adjust the corn and soybean export estimates if demand continues.

Looking ahead, Lung said grain traders are focused on whether USDA continues to see China "phase one" trade agreement purchases or will there be cancellations. He also said they are tuned into South American dry weather and if it will continue to affect crop yields there. But he fears dryness could also be a problem in the U.S. for the 2021 growing season.

“We’re getting a lot of early reports of soil moisture being very low (and) dryness right now,” Lung said. “There is worry going into 2021 if we don’t start to see rains early Spring, it could be something that also starts to develop here.”

As of Dec. 8, according to the U.S. Drought Monitor, 49% of the continental U.S. is in a moderate or worse drought. That is compared to 48% a week earlier and 11% at this time last year.  

USDA officials also released the December crop production report. The estimate for cotton production is down 7% from November and down 20% from 2019. Cotton production for 2020 is forecast at 15.9 million 480-pound bales.