It is quite likely our current yearly corn and soybean export forecasts are too low. Corn sales for the marketing year already total 2.32 billion bu (bbu), 89% of the projected total of 2.6 bbu. Soybean bookings already total 2.2 bbu, 99% of the 2.25 bbu projection. This means for the remainder of the marketing year the US only needs to sell 11 million bu (mbu) of corn and 1 mbu of soybeans per week to meet projected totals. 

Elevated attention is being placed on the 2021/22 stocks to use estimates on corn and soybeans. The US ending stocks on both of these is expected to remain relatively unchanged from this year with 10% on corn and 3% on soybeans. These are very tight projections and leave no room for crop loss this growing season. It also means the United States will need to continue to ration inventory next year as well, and possibly the following year if crops are on the low side. 

More talk is taking place in the market over the drought in the Midwest. While trade has known of this condition for several months, it is becoming more of a factor as we approach the spring planting season. While dry conditions during the planting season can be negative for the market, any indication of them lingering through the growing season will quickly become bullish. The United States cannot afford to lose any production this year and any possibility will receive a reaction. 

This will put more emphasis on the La Nina weather pattern that is now expected to last through the spring and into the summer months. Readings are now starting to build and the current model shows the event lasting into June. If correct, this increases the chances of a dry start to the growing season across the US. While this may benefit an early planting season on corn and soybeans, it could be stressful for the wheat crop in the Southern Plains. 

For now, traders are holding with their current crop estimates in Brazil, even with questionable production. This is holding the soybean crop between 130 and 134 million metric tons (mmt). One of the main differences in Brazilian production is from acreage rather than yield. This is also having an impact on the country’s corn crop. Estimates on corn production range from 105 mmt to 109 mmt. How much Safrinha gets planted is the main factor for crop size. 

There is a another development in the Brazilian corn crop that needs to be monitored. Planting of the Safrinha crop is behind normal, but the crop is also being seeded into excessively wet soils. There are now thoughts this will create shallow root systems and create stand issues later in the growing season. This will be more of an issue as Brazil moves into its dry season. 

Trade is also looking at Brazilian movement and monitoring the possibility of any sales cancellations. This has been feared all marketing year as soybeans have rallied considerably from where most of the crop was sold, which is also taking place in the United States. Much of Brazil’s soybean crop was forward contracted at $6.00 per bushel, about half of what the current spot market is at. Farmers have indicated they will honor contracts though as they have enough bushels to elevate their average values. This rally has also increased new crop sales in Brazil, indicating next year’s production will be large as well. 

We have started to see a major shift in the world soybean market. For the past several months the United States has been the primary supplier of soybeans to the global market. This is starting to change with the South American harvest and those suppliers are now the main sources, especially Brazil. This follows the start of the Brazilian soybean harvest, which is also weighing on the Brazilian soybean basis, making their soybeans more affordable than those from the US. 

There are thoughts that this drop in Brazilian soybean values will lead to elevated US imports, and while possible, there are questions as to when this may happen. The last time the United States imported a large volume of Brazilian soybeans was in 2014. At that time soybeans from Brazil held an average $50.00 per metric ton advantage over the US. Given current freight rates this spread would need to be closer to $60.00 per metric ton in today’s market. At the present time Brazil soybeans are only $12.00 per metric ton under the US, making large imports unlikely at this time. 

Questions are rising over China’s future feed demand. Chinese officials claim hog production in the country will rebound to pre-African Swine Fever levels by June. When this disease outbreak happened China was forced to cull 40% of its hog herd, reducing feed grain demand as it did. As the hog herd started to rebuild, China upped its feed grain imports, including corn and soybeans. There remain disease issues in the country and the recovery is now expected to take longer than initial thought. This could easily reduce China’s buying of commodities for the next few months. 

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