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Export Sales Key to Prices in Coming Months
Thursday, August 1, 2024
filed under: Marketing/Risk Management
By Mike Krueger*
All agricultural markets have been in a “funk” since the planting season began last spring. There are a number of reasons for the decline in prices over the summer, but the biggest reason is that growing season weather across the U.S. has been almost perfect.
There were serious concerns about dry conditions across the western Corn Belt and Northern Plains coming into the planting season. Those early concerns about a potential droughty summer were replaced by a very wet April and May. The extremely wet conditions did result in some lost acres due to flooding, etc., but in the end, those lost acres were insignificant.
The good news for oil sunflower producers is that prices have firmed while all other markets have declined. That is, in part, because sunflower prices slumped earlier. Oil sunflower supplies will tighten because of the sharp decline in planted acres in 2024, but supplies will still be very adequate.
Crop conditions for all crops have been at the high end of the “good to excellent” ratings in the weekly crop condition reports. There was also little or no hot weather, and rains across most of the U.S. were timely and plentiful. The result was that the USDA increased the corn and soybean yield estimates to all-time records in the August production estimates. The spring wheat crop is also projected to establish a new all-time record yield.
The assumption is that sunflower yields will also set new records, following two years of record yields. The USDA doesn’t report a sunflower yield estimate until October. Planted acres of oil and confection sunflower were down just over 30% from last year. That is the smallest sunflower acreage since the early 1990s.
The U.S. hard winter wheat crop also rebounded significantly after several consecutive years of significant drought.
In short, 2024 will go down as one of the best production years on record. Only an early freeze or wet harvest weather could change this outcome.
Canada was also very dry early; but summer weather was better, and the USDA is forecasting the Canadian wheat crop to be about 10% bigger than last year.
Weather and crop production across the rest of the world wasn’t quite as good as in North America. Brazil had a big soybean crop, but not nearly as big as early estimates suggested. The USDA’s August report pegged their soybean crop at 153 million metric tons (MMTs), compared to 162 million last year.
Brazil’s corn crop is pegged by USDA at 122 MMTs, down from 127 last year. Other estimates are below 120 MMTs. This could shift some corn export business from Brazil to the U.S.
It was extremely wet across much of western Europe. The result was a smaller wheat crop that also suffered some loss of quality. Wheat and corn production in both Ukraine and Russia will also be smaller than last year because of a warm and drier summer in these regions and smaller planted acreage. The Ukraine/ Russia war continues, but has had little impact on shipments from either country.
This is what the August USDA supply and demand numbers told us:
Corn – USDA pegged the corn yield at 183.1 bushels per acre. That is a new all-time record yield and up 2.1 bu/ac from their last guess. Harvested acres were reduced by 1%, and exports were increased by 50 million bushels.
Ending stocks for the 2024/25 marketing year are now pegged at 2.073 billion bushels. That is up from 1.867 billion bushels in the current marketing year. Some analysts were talking about ending stocks soaring to nearly 3.0 billion bushels. That won’t happen.
Wheat – The spring wheat yield will also be a record by a wide margin. The savior was that the USDA reduced harvested acres by 5% from the late June estimate. The result was a slightly smaller production estimate than expected. Wheat exports are now estimated to jump from 707 million bushels last year to 825 million bushels this marketing year. U.S. wheat ending stocks will increase from 702 million bushels last year to 828 million bushels this marketing year.
Soybeans – The soybean yield estimate will be a new record at 53.2 bushels per acre. That is up 1.2 bushels per acre from last month. Crush and exports are also projected to increase from the current marketing year — but not enough to offset the BIG production estimate. The result is that U.S. soybean ending stocks are now projected to balloon from 345 million bushels this marketing year to 560 million bushels in the new marketing year. That is a bearish number.
The direction of grain and oilseed prices over the next several months will depend mostly on the direction of export sales of soybeans, corn and wheat. The USDA is forecasting increases in export demand for all three crops. Those increases are important to prevent ending supplies from getting even bigger. This is especially the case with soybeans.
The trouble is that new-crop soybean export sales are the smallest they’ve been at this time in a decade. China has been on a very slow purchasing pace of soybeans from the U.S. Brazil still has a large carryover of soybean supplies. The pace of corn and wheat export sales has improved over last year. Smaller corn and wheat crops in the Black Sea region, coupled with wheat quality issues in the EU, should support US exports.
* Mike Krueger founded The Money Farm, and is now a senior analyst with World Perspectives, a Washington, D.C.-based consulting company. While the information in this article is believed to be reliable, marketing involves risk, and the author and The Sunflower assume no responsibility for its use.