Volatility has been the name of the game for the grain and oilseed markets throughout the 2021 growing season. Near-record, tight, old crop stocks across the board have caused trade to keep an even-closer eye on growing conditions throughout the midwest this year. For most crops, the battle between east vs. west has added to the uncertainty of what this final yield picture may or may not look like.
For soybeans specifically, eastern growing regions and crop conditions have been favourable to crop development, and the early planting date is also typically supportive of increased yields. However, what has somewhat muddied the outlook are the reports of too much moisture stress in the eastern beans, along with inconsistency from field to field. In the western growing regions, it has been a much different story with drought conditions taking a toll on crops. This is prominent in the Dakotas, where good / ex conditions are quite low. August is the month that makes or breaks yield for soybeans, and after last year’s big miss on yield guesses, it is likely that trade could take a more "wait-and-see" approach this year heading into harvest. On the demand side of the equation, things have quieted. After a very aggressive start to the new crop export program early in the crop year, China’s presence has been relatively absent. The USDA is already pricing in an approximate 200-million bushel decline in exports year-over-year, but trade needs to see a return of exports if further upside is to be warranted. Additionally, crush pace has slowed into the end of the year. Whether this is due to a slow down in demand or a lack of supply, though, won’t be known until final old-crop estimates are produced. The key going forward will be the final 2021 crop size, export demand and size of the new SA soybean crop, which many are already betting on being a record large.
Many of the same weather conditions plagued the U.S. corn crop as well this growing season, with conditions from east to west varying greatly. Favourable conditions in the east are hoped to offset drought-stress losses in the west. Yield data will ultimately be the key at harvest. BRZ second-crop corn also had a very tough year, with drought and frost knocking a substantial number of bushels out of production. The latest estimates are in the low-80 mmt for total BRZ corn crop. Many are looking for this to shift world / China demand to the U.S. and Ukraine. Like soybeans, USDA’s balance sheet has a large 350-million bushel decrease in exports year-over-year. New crop corn exports were red hot at the start of the year but have also tailed off as of late. However, ethanol demand has remained strong, and barring a large-scale return to lockdowns, it should stay above levels from a year ago. Going forward, trade is waiting to see the final yield data and a return of export demand. Large increases are once again expected in BRZ crops next year, but until this can be realized, world feed grain stocks will be tight.
Winter wheat yields in the U.S. ended up being better than expected, despite some early growing drought and cold weather concerns. The most recent story, however, has been the very poor condition of the spring wheat crop. Drought has taken its toll, with the crop now rated the worst since 1988. The Canadian prairie crop is not much better off. The USDA has drastically cut spring wheat yield forecasts, but there could still be room for further production reductions due to crop abandonment. Russian yields have also been disappointing so far this year. World wheat trade has picked up, with prices looking like they have put in their seasonal low as harvest pressure starts to ease. U.S. wheat continues to be expensive in the world marketplace, but this is common as the U.S. is typically a price follower. In any case, ending stocks in the US and major-exporting nations continue to contract. This will be key to watch going forward and with the losses to U.S., Canadian and Russian wheat, will put even more importance on the this year's southern-hemisphere harvest.