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Harvest is now in the rear-view mirror which means the focus will be on growing conditions in South America, exports, planting intentions for 2022, and relations with China. Traders are upbeat on corn because of the rise in ethanol production, and expectations of fewer acres planted next spring due to the increase in fertilizer costs. While fewer acres will likely be planted, the question is how much producers will vary from their normal rotation? Meanwhile, there are some factors that may be getting overlooked. One is that global stocks are 2.7 million tons higher than a year ago, plus the dollar has risen 6.8 percent since May which does not bode well for exports. Last week, inspections were 33.6 MB and must average 52.9 MB to reach USDA’s target of 2.5 million. Long story short is that while there are reasons to be friendly, there are other factors that are being overshadowed.
Soybean futures have risen recently as a larger crop in South America has been factored into values. While exports have been strong, that might be coming to an end. Last week, inspections were robust at 76.1 MB with China taking 61 percent of the shipments. However, this was the first downtick seen in the overall pace of shipments this season, as well as a downtick in shipments to China. As mentioned in previous comments, exports have a history of peaking in November. While much of the bearish news has been discounted, a threat to the crop in South America may be needed for a sustained move higher.
Wheat continues to be underpinned from the smallest global stockpile since 2016. However, there are some concerns from the USDA lowering their export forecast for the U.S, while increasing that of the E.U, Russia, and Ukraine. Furthermore, the rise in the dollar will not help. Last week, export inspections were 14.2 MB and must average 17.1 MB each week to achieve USDA’s target of 860 MB. Meanwhile, the funds are short 90 MB which will keep the market propped up if they continue to cover. In other developments, the crop rating for winter wheat was up one-point to 46 percent in good-to-excellent condition and is on par with last year’s rating.
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