Rationing has been a primary factor in price discovery all marketing year. It is quite likely we will see this continue well into the next marketing year as well. Demand on old crop inventory has faded as new crop bushels out of South America become available, but global importers are questioning how long these countries will be reliable sources given ongoing production issues. As a result, the United States is already seeing record new crop demand on corn, soybeans and wheat. If any yield loss is suspected in the United States this year, we could see demand climb even higher. We may need to see even higher new crop values to restrict demand, primarily for exports.

Ethanol corn use for the month of May totaled 447.56 million bu (mbu). This was a 9.6 percent increase from April and well above the usage from May 2020. Yearly ethanol consumption of corn now totals 3.73 billion bu (bbu). To meet the yearly USDA projections, ethanol demand will need to average 442 mbu per month. The ability to achieve this volume depends heavily upon ethanol margins over the next few months as well as how many plants still need to shut down for annual maintenance.

Crush data for soybeans has been released with a May usage number of 173.48 mbu. This was up 3.65 mbu from April, but a 3.4 percent decrease from May 2020. Cumulative crush for the year now stands at 1.64 bbu. To reach the yearly projected total set by the USDA, crush needs to average 193.6 mbu for the next three months.

Export data for the month of May was also released. Corn exports for the month totaled a record 333.78 mbu to put yearly loadings at 2.15 bbu. Soybean loadings in May totaled 46.5 mbu to bring the yearly total to 2.23 bbu. For the remainder of the year, the United States needs to load out 44 mbu of soybeans and 700 mbu of corn to reach yearly projections. Wheat exports ended the marketing year at 991.4 mbu, 6.4 mbu above the USDA projection.

Trade is starting to show more interest in the new crop stocks to use projections. In the latest USDA report, new crop stocks to use was projected at 9.2 percent on corn and 3.5 percent on soybeans. Given the tighter old crop reserves than expected in the quarterly stocks and lower plantings totals, these ratios may tighten in future balance sheets. Given the fact we are already at rationing levels this will continue to give us price support.

We are also seeing more interest in how the global market reacts to these tight stocks to use forecasts. Analysts believe that if the global market is concerned with tight ending stocks, they will want to book coverage as soon as possible before values rally. The United States already has record new crop sales on the books however, so a portion of this may have already happened. The most interest in this scenario is on China who is known for basing purchases off values as much as need.

Old crop export sales have slowed in recent weeks, but cumulative bookings are still well ahead of last year for corn and soybeans. At the present time the United States has 2.73 bbu of corn sold, a 64 percent increase from last year. Soybean sales currently total 2.27 bbu, a 38 percent increase year to year. The marketing year just started on wheat with sales at 235 million bu, an 8 percent decrease on the year.

When it comes to new crop exports the most interest remains on China. China has been an active buyer of new crop corn and soybeans and leads in U.S. sales. At the present time the United States has confirmed sales of 460 mbu of corn and 150.5 mbu of soybeans for the 2021/22 marketing year to China. There are also sales in the unknown category that are believed to be to China as well. A concern with these totals is that sales to others may not be enough to reach yearly estimates if China stops buying.

These worries were amplified when the U.S. attaché in China lowered yearly corn imports to 20 million metric tons (mmt) from the current USDA forecast of 26 mmt. The attaché is using a lower figure than the USDA as they feel the large domestic corn crop in China will reduce the need for imports. Given the fact China has already secured 12 mmt of corn from the United States and another 6 mmt from Ukraine, additional purchases may be limited.

We are seeing more debate in the market over the impact of recent weather on crop potential with a well-defined difference in opinion. Nearly one-third of the U.S. corn and soybean production region is suffering from drought conditions at this time. While this is not ideal, some crop analysts claim no yield has been lost. They feel that if rains develop by the end of June, we can still see trend yields. While this may be true, trade is closely monitoring any factor that may reduce yields and further tighten new crop balance sheets.

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