Amid Wet Fields, the Grain Marketplace Continues to Evolve

This week was a bit of a rerun of last week, with cloudy wet weather delaying soybean harvest. It’s still mid-October, so its ok, but the weather gods are not cooperating this year. Remnants of Hurricane Pam, which hit the southwestern coasts of Mexico off the Pacific is supposed to hit Friday and Saturday in SW Ontario further delaying harvest. How does that happen? It would seem somebody has my number. Needless to say, not all of the greater North American corn belt is experiencing this weather. Harvest continues.

This past week we got another WASDE report from USDA. The grains markets have been softening into fall, partly a reflection of seasonality, partly a reflection of a huge crop the field. USDA in their latest rendition of pin the tail on the donkey upped both corn and soybean yields October 12th. USDA boosted domestic corn yield to 176.5 bushels per acre pushing corn to 15.019 billion bushels, one of the largest crops ever. Soybeans were increased to 4.448 billion bushels based on an increased yield of 51.5 bushels per acre.

Grain markets swooned on the news, soybeans a little bit more than corn. Keep in mind the crop is huge in the United States as well here in Ontario and Quebec. I don’t think anybody in Chicago is worried about my cloudy and rainy weather. Non-commercials have weighed in and they were selling. However, with soybean prices the lowest since April 2021, it might be time for buyers like China to roll in.

Perspective is sometimes a virtue when considering USDA numbers. With the 15.019-billion-bushel corn crop, USDA also adjusted the old crop carryover to 1.236 billion bushels, which puts the total crop at 16.280 billion bushels. That’s huge by any standard, but especially so when you look back. I can remember, 15 years ago talking about a huge US crop of 9 billion bushels and theorizing that someday I’d be talking about US corn crops of 14 billion. Well, check that, because we broke through that years ago and considering science and genetics, would a 20-billion-bushel corn crop be in the offing?

It will happen, maybe not soon, but if history is any lesson, it’s a matter of fact. Needless to say, we’ll have to have demand pick up or we’ll need to get a lot more efficient. As it was, USDA lowered total 2020/21 usage by 20 million bushels down to 14.780 billion. The new crop corn ending stock increased to 1.5 billion bushels, but you can bet, that number will be buffeted in the months to come.

Soybeans might be the great liars, but in the end always tell the truth and that means more American soybeans coming out of the field this fall versus what was expected. USDA found some more beans (81 mb) from last year, which ultimately show up in this new crop year. Ending stocks for 2021/22 were adjusted up to reflect the reality of the September 30th stocks report, were pegged at 320 million bushels, up from 185 mb last month. The USDA expects US wheat production to drop from their September report, but as always, each class of wheat has its own supply and demand table, making it difficult to make wide global statements on price. However, prices rose after the report, maybe that will put a silver lining on some of my tile run wheat.

The US dollar has been down lately, which in turn, gave the Canadian loonie some renewed strength. Who knows what happens next, but American inflation numbers came out yesterday which put US inflation at 5.4%, a 13 year high in September. Some of you are surely saying, I told you so, as price increases have been so brazenly obvious. In Canada we hit 4.1% in August, the highest since 2003. Do you see a trend here? Central bankers have told us not to worry. However, at a certain point you’d think central bankers would have to raise interest rates to keep inflation at bay. The question is that “old school” economic thinking vs what we have today? With Covid still a factor, I’m not knowing. It’s becoming a very difficult thing to predict.

As is the weather, as is so many other things. I’m hoping the remnants of the Pacific Hurricane Pam go the other way. I also hope, the Chinese come back and buy some cheaper soybeans and corn. We shall see. Grain stocks are building again and I think we all know what that means. We need buyers for all this grain as the marketplace continues to change and evolve.