This week the market has been focused on the demand side of the equation. Some robust sales into China have been the catalyst for a steady increase in corn and bean prices. This is a key area to watch to determine price direction going forward. The USDA have China on another big buying spree totaling 26mmt of corn and 101mmt of beans in the 21/22 season. The pace to date has been slower than last year, giving rise to some doubts over China’s appetite.

Of the 120mmt of soybeans the US will produce this season, it is expected to export nearly 60mmt.  Chinese demand can switch between the US and Brazil, so the fate of Brazil’s bean crop will have a massive influence on bean prices going forward.  Brazil is seeding their bean crop now into ideal conditions, with CONAB forecasting a record breaking crop due for harvest in January ’22.  Recently China’s purchases of Brazilian beans has fallen, citing declining hog prices and poor crush margins. 

As it stands, Chinese purchases of US origin beans are roughly in line with longer term averages, albeit substantially less than this time last year.  The key metric to watch will be Brazil’s weather going forward.  Does a double dip La Niña cruel their production like it did to the safrinhá corn earlier in the year?  Or will a kind season, see Chinese purchases switch to Brazil, which will drag down prices or beans and the wider oilseed market.

Wheat still remains the master of its own destiny.  There have been a few tweaks to global wheat production with late Russian harvest yielding slightly better than forecast.  Production estimates there have risen to 77.5mmt compared to earlier predictions of 75mmt.  The Russian farmer is seemingly reluctant to sell in protest to the export tax biting into their bottom line.  This is having the effect of keeping global cash values rising, regardless of wider market moves.

Demand is swinging to those origins that can supply high protein wheat.  Canadian exports have been increased, despite production being at multi year lows.  Canada now expects to export 13mmt, out of its drought affected 20mmt crop of high protein wheat.  This will leave their carryout stocks perilously tight.

Australia remains in the box seat to reclaim business in the Mid-East and Northern African markets as well as mopping up most of the SE Asian demand.  Our price makes us super competitive against other origins and ocean freight rates simply increase the reach our crop can go.  Logistics will create some headwinds for prices as all shipping capacity is fully booked out until the middle of next year.

The week ahead….

Grower selling, and port congestion will ultimately keep a lid on prices in the short term despite offshore market strength. 

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Data sources: USDA, Reuters, AHDB, Market Check

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