Soybeans and by association canola, have also been hit hard. Soy has lost nearly 16% of its value in the past seven sessions on the back of rain, a broader commodity sell-off and fears about US biofuel policies. There is some concern that the US Gov’t may review the renewable mandate which could influence the amount of soybeans being used in biodiesel. Nothing concrete, but this is how the market reacts when it is overheating.
As the weather forecast news was being digested, the USDA’s crop condition report came out to completely muddle the picture. Corn conditions down 4% to 68% gd-exc (including a big 14% fall the key state of Iowa) and beans down 5% to 62% gd-exc, including big double digit drops in the key producing states of Iowa and Illinois. There is importantly a view, that should these rains arrive as forecast, there remains very high yield potential for most crops. This is a key point to remember because US corn stocks are expected to be at 7.4% stocks to use by the end of the marketing year – the tightest since the 1990’s – and will need above trend yields to keep the corn balance sheet comfortable.
North Dakota’s spring wheat condition is now at a record low of only 24% gd-exc. Recent rain should halt the decline – at least temporarily.
Brazil’s safrinha corn harvest has started, and yields are coming in lower than expected. It is possible that the USDA will leave the fireworks until the June WASDE report which should give us a more accurate picture of old crop supplies as well as new crop production estimates.
Russia is slowly lifting its expectations for their 2021 season. The Ag Ministry and SovEcon both lifted total wheat production to 82mmt (up from 80mmt). Hot weather is forecast this week which will aid in the development of the winter wheats but may add some stress to the spring sown wheats in the far east.
Last week we wrote it felt like we were at a tipping point. Today it feels like we have driven off a cliff. I’d expect the losses to continue to mount up into next week as markets expand their trading limits.