USDA’s June World Agricultural Supply and Demand Estimates (WASDE) amplified the major themes driving the corn market: Demand is strong, supplies are questionable.
Currently three factors are influencing the corn market, says Ben Brown, University of Missouri agricultural policy and markets analyst. Those include:
- Strong Chinese demand for international feed grains.
- A Brazilian corn crop that continues to deteriorate.
- Increasing concerns of Midwest corn crop conditions.
USDA increased U.S. corn exports by 75 million bushels in the June report.
“That followed a 100-million-bushel-increase in the May WASDE report and a 75-million-bushel increase in the April WASDE report,” Brown says. “So, we’ve seen an increase of 250 million bushels over the previous three months.”
For ethanol, USDA increased use by 75 million bushels based on the most recent data from the Grain Crushings and Co-Products Production report, and weekly ethanol production and refiner and blender net inputs data during May, which indicate demand is almost back to levels seen prior to COVID-19.
“We’ll have to watch the next couple of weeks of the summer driving period for more insights,” Brown says.
Overall, Brown says, USDA tightened the U.S. corn balance sheet another 150 million bushels.
On the supply side, USDA now estimates Brazil’s corn crop at 98.5 million metric tons (MMT), down from 102 MMT last month. That, combined with drought concerns in the U.S., nationwide, USDA shows 72% of the corn crop is rated good to excellent, which is a 4-percentage-point drop from last week. This week’s rating is also 3 points behind last year.
“It’s really amazing to see where we are now compared to where we were a year ago, based on several major factors around the globe that all broke the same way for U.S. corn producers,” Brown says. “We’re now moving into a period where corn-deficit parts of the country could find trouble securing corn until the U.S. harvest comes online this fall. I want to stress that when it comes to the United States, we’re starting to get to a period where any weather scare here will have major impacts on corn prices, especially for people who are speculating in the market.”
For soybeans, USDA’s projections for 2021/22 include higher beginning and ending stocks. Soybean crush for 2020/21 dropped 15 million bushels to 2.175 billion based on a lower forecast for soybean meal domestic disappearance and higher soybean meal imports.
“That surprised the trade,” Brown says.
Old-crop soybean exports were left unchanged from the last month, Brown says, even though we continue to see high exports sales for soybeans.
“The soybean picture remains tight,” he says. “The attention turns to June 30 when we get the acreage report and see if soybeans can pick up enough acres to increase or maintain ending stocks.”
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