By Karl Setzer

The drought that is impacting the European Union may be causing more crop damage that trade is factoring into futures. The current drought in the EU is one of the worst in recent history and cutting the country’s corn production forecast by 25 percent. Some corn fields in the EU are expected to be totally abandoned due to crop loss. This drought is impacting the country’s wheat and oilseeds too. As a result, some EU members are taking steps to curb exports. There are now models that show the drought expanding into Ukraine and potential cutting production there as well.

Recent weather across the United States has been mixed, and in turn, so has its impact on crop development. This has especially been the case on corn with some field scouts claiming production loss is large, while others feel the crop may be their best ever. This uncertainty is also being seen in soybeans, although soybeans are much more tolerant of adverse weather than corn, mainly heat. Heat can impact soybean quality, but yield is not affected as much. Soybeans do need water though, and recent rains are being seen as highly beneficial.

When it comes to soybean production, more attention is being placed on next year’s Brazilian crop. The Brazilian firm Safras is forecasting a 2023 Brazil soybean crop of 154.5 million metric tons (mmt), an 18 percent increase from this year’s production. A return to normal growing conditions and an increase to planted area are behind the higher production figure. Safras is projecting 2023 soybean exports of 91.5 mmt, well above this year’s 77.2 mmt projected total.

It appears as though the Brazilian soybean export program for the year has peaked. Brazil exported 311 million bu (mbu) of soybeans in March and has trailed off since. In June, Brazil exported 238 mbu of soybeans and July’s exports are expected to total 194 mbu. There are hopes this will bring the U.S. export business, but this may be limited if at all. China is still buying soybeans from Brazil for August shipment. Most importers are now at the point where they will go hand to mouth until the United States sees new crop supplies arrive.

China remains mostly absent from the global commodity market. This is especially the case on soybeans from the United States. China has bought soybeans from Brazil in the past week for late summer delivery, but the volumes have been light. It is quite possible this could be a reflection of ongoing COVID worries in the country, especially with new travel restrictions being enforced in the country. The rally in soybean futures has also dampened buying interest from not only China, but all importers.

Ukrainian officials have revised the country’s grain production and export forecast. Ukraine is now expected to produce 20 mmt of wheat this year, an 8 percent increase from the last projection. Ukraine only needs roughly 4 mmt of wheat for domestic use. A reported 12 mmt of Ukraine’s winter wheat has already been harvested. The Ukraine corn crop was also increased to a projected 27.3 mmt. Ukraine is hopeful for large grain crops to help replenish their government funds.

Country movement of the remaining farm stored corn and soybeans has been light in recent weeks. Price volatility is one reason for this lack of selling, but so is uncertainty over this year’s crop sizes. In regions where the crops look better movement has been up, but even then, farmers are tight fisted. Hopes for a market rebound are also contributing to the light movement.

The question now is when this remaining inventory will move. It is not out of the question we could see farmers hold their old crop bushels into harvest and see how much storage they need before extending their coverage. If correct, we should see interior basis strength last.

Farmers are already starting to look forward to their next production season and are showing concern over the economic outlook. Commodity values have receded in recent weeks, and while still profitable, the worry is they will continue to decline. Input values have also started to back off recently, but not at the rate commodities have. This is especially worrisome for farmers who are seeing stress on this year’s crops and uncertainty on production.

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