Karl Setzer

It is no surprise that low commodity values have pressured U.S. farmer balance sheets. This is not necessarily from low demand, but more from elevated production and inventory on a global level. Wheat futures are seeing the most negativity from this situation as large Russian and Ukraine wheat supplies are allowing those sources to export elevated volume of grain at lower costs. This is pressuring both U.S. wheat values and demand. One great benefit for the U.S. wheat market, as well as corn and soybeans, is that U.S. commodities are higher in quality than those from other sources and are needed to blend with lower quality imports.

One of the greatest negative factors for the soy complex right now is the build in world soybean supplies. The U.S. soybean carryout at the end of this marketing year is expected to be 30 percent higher than last year at 340 million bu. This is up 76 mbu on the year. Current models indicate the U.S. carryout could increase another 40 percent to 50 percent by the end of the 2024/25 marketing year. The global soybean supply has steadily increased for the past three years and will again this year, given the large crop out of South America. There are concerns over the next world soybean crop though, if a strong La Nina develops again to impact South American production. The last La Nina cut Argentine production by 50 percent from average.

Trade is showing more interest in the lack of new crop export demand we are seeing for corn and new crop soybeans. Cumulative new crop soybean sales total just 966,000 metric tons, well below last year’s nearly 3 million mt of sales at this point. What is most concerning is there are no sales listed to China. Soybean bulls claim China and other importers are just being patient in extending coverage and our sales are going to be backloaded. While this is possible, the larger South American soybean crop is also weighing on U.S. sales. A slow-down in global oilseed trade is negative for sales as well.

No changes were made to the domestic side of the USDA’s corn balance sheets this month.This left ending stocks at 2.02 billion bu for old crop, and 2.1 bbu for new crop. The average cash outlook for the 2024/25 marketing year was also left unchanged at $4.40 per bushel.

We are now at a stage of the marketing year where fundamental interest starts to shift. Up to this point, much of the attention in the market has been on getting this year’s corn and soybean crops planted. Now that this has been completed, market interest shifts more toward crop growth and condition. For the past several growing seasons, we have seen crop stress from drought. At the current time there is very little drought in the Corn Belt from widespread spring rains. As a result, we are seeing less weather premium in futures’ values. This is especially the case with yields being very respectable in recent years, even with weather stress.

The updated June acreage data for corn was bearish for the complex. The USDA raised its planted corn acreage estimate for this year to 91.5 million and its harvested acreage to 83.4 million. This is a 3 percent reduction from last year’s 94.6 million planted and 86.5 million harvested acres for corn. This is the 8th highest corn acreage on record since 1944. Corn acreage is expected to be down in 31 of the 48 main corn producing states. Using the revised harvested acres and a current yield estimate of 181 bushels per acre point to a 15.1 billion bu crop, 240 million bu more than the current USDA projection.

It is not uncommon to see elevated attention on U.S. weather conditions during the growing season, but this year we are seeing just as much weather interest from the global perspective. The Black Sea has been dry, causing crop loss in both Russia and Ukraine. This is on top of the losses in Russia from frost. Sources in Russia claim any crop impacted by frost has been reseeded, but this does not prevent drought losses, and production loss is still expected.

For once, we did see moderate changes to the U.S. corn balance sheets in the July update. For the 2023/24 marketing year, the USDA bumped imports up 5 million bu, but also raised feed and residual usage and exports by 75 mbu each to trim the U.S. carryout by 145 mbu. This put the U.S. carryout for this year at 1.877 billion bu. This is a 12.6 percent stocks to use and equates to a cash value of $4.65 per bushel.

The U.S. Climate Prediction Center has revised its La Nina forecast. The CPC now believes there is a 70 percent chance of a La Nina being in place from now through October. This probability increases to 79 percent from November through January 2025.

Weather remains a driving factor in daily price discovery. This is not just for production, but for transit issues as well. Growing interest is falling on river levels in the