We are starting to hear more reports of less than favorable growing conditions across South America, including Brazil. The start of the soybean harvest and safrinha planting in Brazil has been delayed due to excessive rainfall. While no major soybean yield loss has taken place, field scouts are worried that excessive rainfall is taking a toll on soybean quality. The main concern right now is that soybeans are not maturing and drying in the fields. The longer it takes soybeans to finish, the less time there is to produce a decent-sized safrinha crop. This comes as the world corn inventory falls to a10-year low.

We are now at a point where we will start to see more interest in the upcoming U.S. planting season. This will start to put more emphasis on U.S. weather, especially to see if the weaker La Nina event will impact U.S. production. Given the short length that is expected for the weather event, the La Nina is forecast to be neutral by the end of the U.S. planting season. Commodity demand continues to rise in the U.S., making it necessary to consistently produce large crops. We are already at rationing positions on corn and soybeans, making the market more sensitive to potential production changes.

While the USDA did trim its carryout estimates in its latest balance sheets update, very few changes were made to demand. This was a bit surprising for trade as demand for U.S. corn, soybeans, and wheat is running well ahead of last year, both for export and domestically. What trade seems to be overlooking is the fact that soybean and wheat demand will equal production this year, and corn demand is projected to be greater than production.

We are starting to see a noticeable shift in how trade looks at supply and demand outlooks. For the past several months we have seen traders focus on the supply side of balance sheets. This has pressured the market as production in both the United States and South America will likely be record sized this year.

After the latest USDA balance sheet update and quarterly stocks data for the U.S., trade is now looking more closely at the demand side of the equation. Commodity demand remains at an all-time high, mainly from the surge in renewable fuel manufacturing around the world. This has caused ending stock forecasts to tighten globally, even with big production figures. This is especially the case for corn, where the global carryout this year is forecast to be the lowest in the past decade.

For several weeks there has been talk of quality concerns in China’s grain storage facilities, and we are now seeing actual numbers to back up those claims. Chinese officials are reporting 9 percent of their corn in storage is what they consider Grade 1, 1.5 percent less than last year. Grade 2 corn inventory is steady from last year, but lower quality Grade 3 inventory is up 3.7 percent. Corn was wetter at harvest this year, and ongoing rain and warmer than normal temperatures have prevented corn from drying down. This has also created perfect conditions for fungus and mold to develop. It is not out of question China may need to bump corn imports for blending with these lower grade stocks.

China’s soybean inventory is in much better shape though, with quality higher than on last year’s crop. Sources claim the volume of Grade 1 soybeans is up 8.5 percent from last year, while Grade 3 soybean inventory is down 10 percent.

While the futures market remains volatile, the U.S. cash markets have started to see less choppy trade. Farmer selling picked up prior to the end of 2024 as tax positions were squared up, and market values posted an end-of-year recovery. Since then, country movement has been steady, but not overwhelming. This has allowed interior basis values to stabilize, although we do continue to hear of localized premiums for quick ship bushels. Winter weather has slowed movement in some regions of the interior market, and some farmers have extended coverage as far as they feel comfortable. Given the steady interior movement since harvest, some buyers are already trying to determine where future needs will be sourced from.

Russian officials have revised the country’s 2024/25 grain export estimate with a sizable reduction from the previous year. Russia exported a record 72 million metric tons of grain in the 2023/24 marketing year, but this is expected to drop to just 57 mmt this year. A smaller grain crop is one reason for this decline, but so is stronger enforcement of Russia’s export quota and price floor regulations. The Russian government is also taking stronger measures to build its domestic food reserves, cutting exportable grain supplies.

The Climate Prediction Center revised its La Nina forecast with little change from last month. The CPC states La Nina conditions will linger through April, turning neutral by May. If accurate, this will likely lead to a favorable planting season in the U.S. and limit growing season stress. South America is already seeing the impact of a La Nina, which has caused drought conditions in parts of Argentina, Paraguay, and Southern Brazil. Even if the La Nina is not strong or long lasting, it can negatively affect production in these areas.

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