The predominate fundamental story in the market right now is weather and what impact it has had on U.S. yields. There is little doubt that the U.S. corn yield has been reduced, but by how much is hard to predict. While there are several years that are comparable to this one, the advancement in genetics and farming practices has likely buffered loss potential. At this time, most analysts feel the U.S. has lost 500 million bu of corn production due to drought conditions. While this is possible, the U.S. would still see its ending stocks increase 305 million bu from last year, even with this loss.

It is also likely that the higher futures that have followed production losses will trim demand, which was already suspect to begin with. It is not out of the question the U.S. could lose a sizable volume of production this year and still see its stocks to use ratio widen. This possibility is keeping corn futures in check when the market rallies, especially with the U.S. already the highest priced source in the global market.

The real concern should be on soybeans, as the U.S. cannot afford any yield loss this year given our ongoing tight stocks to use that are holding at a rationing level.

This year’s drought across the U.S. may have more impacts on production than expected. It is pretty much a given that recent weather has trimmed the U.S. corn yield and some analysts believe soybean yield has also been reduced, even though August is the most critical window for weather to impact soybean production. Drought conditions may limit double cropping across the U.S. this year though to further limit soybean inventory. As a result, the managed money crowd has been more resilient to selling soybeans than grains.

Demand remains behind the pace needed to reach yearly expectations on corn, soybeans and wheat, and if we do not see improvement soon, we will again see sales projections adjusted in balance sheets. This seems more likely on corn at this time, but all three contracts could see higher carryout estimates as a result. Wheat is becoming more of a concern – unshipped sales are dropping quickly which leaves little on the books to ship for the remainder of the marketing year.

Not only is trade concerned with poor old crop demand but we are seeing more interest in the slow start to the new crop export program as well. The main reason for the slow sales is the record corn and soybean crops out of Brazil that are being offered at sizable discounts to the U.S. The marketing year on wheat is just getting underway but those sales remain light as well.

The most concern on poor demand is on corn as exports continue to trail USDA expectation. Now more interest is being shown over new crop demand now as export sales currently total just 119 million bu (mbu) for the 2023/24 marketing year. This is the lowest volume of forward contracted corn in seven years. There is plenty of time for corn demand to build, but this said on the current marketing year and failed to materialize.

Mexico has raised their production forecast on this year’s corn crop by 2 million metric tons (mmt). While not a huge amount this will further trim U.S. exports. Improved farming practices are behind the larger Mexican crop, mainly the elevated use of fertilizer. China has also improved its farming practices including the allowance of more GMO production. As more countries adapt to modern production practices world crop sizes will increase, further narrowing the U.S. market share.

The big story in recent trade was news the Black Sea export corridor will be closing. This was put in place over a year ago as a means for Ukraine to continue with grain loadings in spite of being in a war with Russia. Russia has asked for sanctions against them to be lifted to keep the corridor open, and while some concessions have been offered, Russian officials say they are not enough to warrant an extension.

Russia’s biggest complaints are that their exports are being restricted and they are affecting the country’s economy. Banking limitations are also a main point of difference, mainly Russia not being allowed to use the SWIFT program. The concern with this development is what it will mean for food supplies to developing countries who depend on Black Sea imports for most of their needs.

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