The list of global grain producers that are expected to trim high-cost crops this year is expanding. We have now heard from the European Union with sources claiming corn for grain plantings this year will fall below 20 million acres for the first time in over 100 years. As with most others grain producers, high input costs are the primary cause. Any crop that is nitrogen intensive is going to see fewer acres this year, including in the U.S. Several sources are also showing concern over the elevated handling charges for corn, especially the potential cost of grain drying next fall.

Global wheat production estimates are gaining the most market attention. Two of the most noted recently have been on Australia and Canada. Both wheat producers claim high input costs will lead to fewer acres being planted, and a return to normal weather will temper yields as well. Australia is now predicting a 2026/27 wheat crop of 29 million metric tons, a 19 percent decline from 2025/26. Australian exports are forecast at 23.5 mmt, down 2.5 mmt from this year. Canada is predicting a 26/27 wheat crop of 36.16 mmt, down 10 percent from 25/26. Canada lowered its export forecast to 28.5 mmt for next year, down 1.2 mmt from this year.

Global weather forecasters are closely monitoring the developing El Nino weather pattern. Recent U.S. weather has shown classic El Nino signs, including drought in the U.S. Plains and Southern states. What trade is more concerned with is how the El Nino will impact Asian grain production as many of those countries see drought in these events. Australia is also seeing growth in drought conditions from the strengthening El Nino. Models indicate this year’s El Nino could be similar to the 2015/16 event that was the strongest in 145 years.

Global commodity trade has shifted back to a “hand to mouth” type environment. This means importers are only covering immediate needs and not buying extra to build reserves. One of the main reasons for this is commodity cost and currency valuations. Importers are also not booking any additional freight as transit costs are rising as well. Recent changes to money policy also means it costs more for an importer to hold purchases for an extended period. Clouded consumer demand outlooks are also tempering global commodity trade and may for some time.

The most commodity trade we are seeing right now is on grains. Several small, private grain sales were announced recently, including South Korea buying feed corn from the U.S. Feed wheat demand is also on the rise, with global importers turning to Australia for needs. Most of these sales are destined for the Asian market where weather remains less than ideal for current crops. This includes China where rain is preventing spring crops from being seeded.

The U.S. cash markets remain strong, even with elevated futures. This is especially the case for soybeans with some Western Corn Belt soy crushers already showing concern over long-term supplies. Some crushers are already locking in needs for the remainder of the year, especially where crush margins are the strongest. Crush margins on soybeans are running at all-time highs near $3.40 per bushel and processors want to capture as much of this as possible. Ethanol returns are also above average right now, ranging from 30 to 40 cents per gallon in recent weeks.

The Federal Reserve released its April interest rate decision, and by a vote of 8 to 4 decided to leave interest rates unchanged in a range from 3.5-3.75 percent. This was the most dissenting votes in a decision since Oct. 6, 1992. One vote wanted the range lowered, while three supported holding rates steady but wanted languages removed that indicate easing rates in the future. This was actually more of a negative indicator for the future of the U.S. economy. Statements indicate the U.S. economy has been expanding at a decent pace, and that inflation has been driven upward by energy costs. The Fed also noted job gains remain slow and jobless claims have been little changed.

Fundamentals continue to conflict with livestock technicals, and fundamentals are winning. The number of active New World Screwworm cases in Mexico had risen to 1,647, with 144 cases in bordering states. It is unlikely we will see a build in the U.S. cattle herd or beef supply until this situation is remedied. This continues to draw in managed money buying.

At the same time, there is more debate on what China will set for a sow capacity level. China has culled enough sows to reach the government’s 39 million head target. Even so, pork prices in China remain stressed and consumer demand is poor. There are several reports the Chinese government may lower the sow cap to 36.5 million head, indicating more culling is likely.

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is collected from a variety of sources and is believed to be reliable but is not guaranteed to be accurate. This report is provided for informational purposes only and is not furnished for the purpose of, nor is it intended to be relied upon for specific trading in commodities herein named.