While early, drought readings from across the United States are becoming more of a market topic. Weekly readings indicate 60 percent of the U.S. corn production area is in drought conditions, well above last year’s 31 percent. Soybean production area is 51 percent in drought, up from last year’s 25 percent. Wheat area in drought is nearly double last year at 23 percent compared to 12 percent a year ago.

Drought at this time of year tends to receive little market interest as dry conditions can lead to an early, fast U.S. planting season. History shows a dry spring also tends to lead to higher yields. U.S. balance sheets are quite tight this year, especially on corn, where last year’s crop fell short of demand. This means the U.S. will need an even larger corn crop this year, and anything to jeopardize production will receive attention.

The U.S. planting season is quickly approaching, and as it does, more interest is falling on acres. Analysts have projected a sizable increase in U.S. corn acres this year, basing this mostly on economics and futures values. While futures do favor corn over soybeans by a ratio of 2.2:1, other factors are weighing against corn. One of these is the spike in fertilizer values, with urea jumping over $70 per ton in just the past week. There are also some concerns over U.S. potash imports if tariffs against Canada are enforced.

Not only have futures shown elevated volatility in recent sessions, so have basis values. Country movement spiked at the end of 2024, and this carried into early 2025. Sales and deliveries have now trailed off, and buyers are again being forced to push for movement. This comes as winter weather returns to the U.S. interior market, further lowering any interest in movement.

China is once again stating its intent to become more self-reliant on commodity needs and is taking steps to push the use of biotech technology. The primary goal of this is to provide food security and become less reliant on imports. China has issued new guidelines that will promote the use of GMO technology on corn, soybeans, and wheat. Chinese officials also are working to improve livestock genetics to improve gains and promote disease resistance. China hopes to have these in place by 2028.

Another push is being made for the approval of E-15 to be offered year-around. This has been attempted several times, including in a recent government spending package, but has been cut from final deals. Several groups are pushing for this change, including the American Petroleum Institute.

While this increase would be a step in the right direction, we may not see it improve ethanol demand as much as hoped. For one, we have already seen year-around use as a temporary measure for the past few years. We also need to consider that approving E-15 use and mandating it are two separate measures. Until E-15 use is mandated, its impact will remain limited.

South American soybean harvest activity is picking up and this has been noted in the U.S. export market. Sales of soybeans have dropped considerably in recent weeks which is not uncommon when the South American harvest gets underway. A total collapse in soybean demand is not expected, as harvest delays continue to bring the U.S. a steady stream of buyers for now. Brazil will also be loading most vessels for China, leaving the U.S. to fill voids. Trade is also heavily questioning Brazil’s exports on a whole as domestic demand has trimmed the country exportable stocks.

The Rosario Grain Exchange has updated its Argentine production forecasts, cutting them on both corn and soybeans. Rosario put the Argentine corn crop at 44.5 million metric tons, down 1.5 mmt from its previous estimate. The group’s soybean crop estimate is now 46.5 mmt, down 1 mmt from the last projection. These reductions are the result of ongoing drought stress during the growing season. In the latest WASDE report, the USDA put Argentine crops at 50 mmt for corn and 49 mmt of soybeans.

The Brazilian firm CONAB updated its production forecasts for that country as well. CONAB put the Brazilian soybean crop at 167.37 mmt, up from the previous estimate of 166 mmt. CONAB also raised its corn production estimate to 122.76 mmt, up slightly from the prior 122 mmt. These are still on the low end of Brazil production estimates, including below the USDA. The latest USDA projections for Brazil are 169 mmt of soybeans and 126 mmt for corn.

The market continues to receive mixed signals on the Chinese economy, and in turn its impact on commodity demand outlooks. Data from China shows farm loans have increased 12.3 percent from last year. One segment of economists claims this shows farmers in China are preparing to expand operations, while others feel it is a sign that farmers need additional financial assistance. The same is being said for student loans in China that are up 28.7 percent from last year. Some believe this is a sign that more students are enrolling in education systems, but others feel this is the result of a tightening jobs market. The fact is China’s commodity appetite has started to slow, regardless of the reason why.

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