We are starting to see more interest on new crop balance sheets and potential 2021/22 ending stocks. The USDA is currently predicting a new crop corn carryout of 1.4 billion bu (bbu). Many analysts feel this is too high and actual ending stocks will be closer to 1 bbu. The general feel is that both exports and ethanol production are understated given the smaller corn crop in Brazil and the lower competition we will see. The uncertainty on corn demand is feed as we continue to see alternative grains used, mainly wheat.

Even more interest is being placed on the new crop soybean carryout estimate. The USDA is already predicting a very thin 155 million bu (mbu) soybean carryout at the end of the 2021/22 marketing year. Give this tight projection, if the United States would see yield decrease as little as 1 bushel per acre out ending stocks would be cut in half. If we do see a reduction to yields, there is little doubt the USDA will make similar cuts to soybean usage to maintain a stocks to use close to 3 percent.

Corn harvest is starting to advance in South America with surprising results. Corn harvest is just over half complete in Argentina and yields are reported as good. The Safrinha harvest in Brazil is getting underway but sources claim yields are better than expected. While early this is already raising some questions on the recent reductions we have seen to Brazil’s overall production.

We are also seeing more interest on China’s corn production. Chinese officials have put this year’s corn crop at 273.5 mmt, a 5 percent increase from a year ago. China is already forecasting another 6 percent increase in corn production next year as plantings continue to rise. Corn production may continue to increase in China even if acres hold steady as the country improves its farming practices and uses more advanced technology.

Wheat harvest is staring to progress in the United States. Yield reports are mixed, but for the most part are better than average. The concern with wheat remains on the spring crop as more losses and abandonment are being reported. The quality of the remaining spring wheat is also being questioned as scouts claim it will likely be lower than normal.

One benefit for wheat has been the increase in export interest. The question is how long this will last. Brazilian officials claim their wheat crop is up 1.5 million metric tons (mmt) from last year. China has also upped their wheat production by 1.6 percent and the Black Sea crop is going to be considerably larger than a year ago. In addition, the Australian crop is expected to be another large one as well. These larger crops may limit the overall demand we see for our wheat this year.

The impacts of recent flooding in China are being closely monitored by trade. It is thought that at least some crop loss has taken place in the country. This may increase China’s buying needs from the global market. There are also concerns over what the floods may have done to livestock production as high waters could have caused a spread of African swine fever from small farms.

Excessive rainfall has also been a problem in the European Union. The most impact there has been to wheat production. Wheat harvest in the EU is currently reported at just 4 percent compared to the 40 percent from a year ago. Not only has fieldwork been slowed, but there is likely damage in unharvested fields. While this may decrease the volume of milling quality wheat, it could mean more will be available for feed use in a global market that is already using that grain over corn as much as possible.

Trade is once again monitoring La Nina weather patterns. According to a data from NOAA, in 12 of the past years there was a La Nina event, there was another event in eight of the following years. If correct it is believed the event will start to strengthen from September to November. The concern with this possibility is it could bring another year of drought to South America.

Gasoline demand is being closely monitored by trade. Current gasoline demand is up 9 percent from last year as more travel starts to take place across the United States. Hopes are this will start to draw down U.S. ethanol stocks as they are well above those of last year when no travel was taking place. The concern with ethanol demand is that high energy values will start to restrict travel, especially when the summer driving season comes to an end.

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