By Karl Setzer

 There is a major difference in opinion forming over actual U.S. export demand, especially on corn. According to the latest Census export data on corn, total U.S. exports are 290 mbu higher than what weekly loadings numbers indicate. This is from the high volumes of corn that Canada and Mexico have imported, which do not show up in weekly reports as the grain is moved by rail, not by vessel. Census data indicates that for Canada alone, the United States has shipped 193 mbu of corn compared to the yearly estimate from the USDA for 150 mbu in trade.

A concern on the global food supply is that many traditional suppliers have placed restrictions on exports until they know their own needs will be covered. The most talked about of this has been on wheat, especially from India. India is currently offering wheat for export but only to countries who have no other means of covering food needs. The European Union has upped its wheat forecast, which will help extend global supplies, but what the market is really waiting for is the next crop out of Australia, although this will not be available until this coming fall.

For the past several months the United States has been pressured in the global market on sales from cheaper sources, mainly from South America. These spreads were the result of new crop bushels from both Brazil and Argentina being offered at sizable discounts to the United States, but now that harvest is progressing, differences are starting to narrow. This is especially the case on soybeans where the Brazilian crop was smaller than expected. Hopes are this spread will narrow enough to bring the United States some late summer business.

The cash market has provided a large amount of support recently as country movement of old crop inventory has been light. This comes at the same time processing margins across the United States have remained strong, especially soybean crush and ethanol. This has buyers pushing for coverage, even with elevated futures. The feed market is showing more hesitation in pushing bids as margins are tighter in the livestock industry.

The question in the cash market is when we will see movement of remaining farm stored inventory. Typically, once a farmer is done with their spring planting and the crop is growing, we see elevated country movement, especially if the developing crops appear to be in good condition. We may see less movement than usual this year though as farmers have already sold the majority of their old crop bushels. Those who do have inventory left appear to be willing to wait and see if values rally even more before making their final old crop sales.

Trade continues to debate Ukrainian grain supplies and how much they will be able to provide the world market. Ukraine exported 1.7 mmt of commodities in May, and officials in the country claim exports are going to be capped at 2 mmt until its ports are opened back up. Damage continues to take place to Ukraine’s infrastructure which may further restrict their ability to make exports.

Trade is also getting a better idea of how short Ukraine may be on storage this year. The country still has 20 mmt of old crop grain in storage and is expected to produce a total of 65 mmt of crops this year. Given the storage capacity of the country, this will leave roughly 20-25 mmt of crops without storage. This is more of a case for grains as Ukraine has been selling more oilseeds as they can generate more revenue with less movement.

Farmers across the United States remain concerned with their future profitability, even with elevated commodity values. This is mainly from the high cost of production they are already seeing forecast on next year’s crops. Fertilizer did back off at the gulf recently but has now rallied back significantly. Seed and chemical values also remain elevated from historical levels.

One of the greatest concerns we are seeing on farm economics is energy costs. While farmers will not cut back at harvest, some may choose to only do limited fall tillage if we do not see a correction to fuel costs and wait to see if costs dip ahead of next spring. Farmers this fall may be less willing to overly dry crops if needed which could cause storage issues later in the season. Commodity buyers may also be affected by high energy costs if farmers sell into local markets to reduce transit costs, forcing them to extend bids for deliveries.

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