Volatility in the grains and oilseed markets continues to be the main theme of the 2022 growing season. War, weather uncertainty and recessionary concerns have all had their influence and will likely continue to keep trade choppy into year-end.
Depending on final yield data, US soybean ending stocks are likely to come in near last year’s levels. Price action through the year was dramatic, with beans just missing 2012 all-time highs at $17.94 ¾. Focus now shifts over to the demand side of the equation, which will be crucial to price direction moving into the fall. Crush is expected to be up year-over-year, but attention must be paid to competing world veggie oils. Specifically, palm oil price will be the main one to watch as palm oil makes up 35% of all vegetable oil produced globally. Production in both Malaysia and Indonesia is rebounding after COVID-19 restricted their access to foreign labour and hampered their ability to harvest the palm fruit. Export pace will also be important to watch into the fall as we have seen our seasonal slow down in sales for the summer. The extent of sales going forward likely depends on the shape of the Brazilian crop. World supplies of beans are expected to rebound year over year as well, but this expectation is based on a very large 2022/23 Brazilian crop. Estimates are around the 148 mmt mark on expanded acres and high prices. Over the past 2 years, we have seen crop size fall short due to drought. As such, all eyes will be on the pace of planting in October/November as well as weather at the end of December into February, when the bulk of their soybean crop is flowering and filling pods.
US corn ending stocks are likely to come in near to slightly lower than last year’s level. Yield data will be watched closely, especially after the variability of weather during the growing season. On the demand side, feed use is expected to be down on shrinking livestock herds, while exports are near last year’s forecast. Front month corn futures also just missed the 2012 highs back in the spring at $8.43 ¾. Tight supply and uncertainty over the Russia/Ukraine war have been the biggest drivers to the upside. The size of Ukraine’s harvest and how much of it may make the export market continues to be a moving target. Latest estimates sit around 65% for the size of the Ukrainian crop compared to last year. Outside of the Russia/ Ukraine front, trade needs to pay close attention to the pace of South American soybean planting in the fall. With the majority of the Brazilian corn acres being double cropped after beans, the later the planting season, the more risk there is for 2nd crop corn pollination to be pushed into the dry season.
US wheat ending stocks have been shrinking year over year since 2016, and that trend is estimated to continue into the 2022/23 marketing year. Winter wheat production this year was hampered by drought issues in the HRW growing regions. Final yield and acreage data will be important to watch as well for both US and Canadian Spring wheat as wet weather delayed the planting pace and caused the switching of crops back in the spring. War in Russia and Ukraine will continue to keep estimates for world supply and demand very dynamic over the next year. Like the corn, not only will the amount of grain harvested be in question, but also how much of it will actually be able to reach the export market. As well as this, as a whole, major exporting nations stocks to use ratio remains near record tight. The next growing regions to watch will be the southern hemisphere, specifically Australia and Argentina. The key time frame for yield development for these two crops will be Sept through October.