Even though harvest is just getting a good start across the Corn Belt, we are already starting to see interest placed on next year’s production. Trade is looking at this year’s crop potential and trying to determine what will be needed for new crop acres. Given the current stocks-to-use ratios on new crop corn, soybeans and wheat, none of the crops can afford to lose any of their current acreage. This is already starting to cause the individual commodities to show strength to try and prevent acres from declining.

The most interest has been on soybeans where new crop stocks to use is already projected at a minimal 3.5 percent, and that may be too high. Given this scenario it may take two and possibly three years for the soybean balance sheets to improve, and that is with high acreage and yields both. Corn futures are starting to react to this situation, as that crop needs to be large as well. The most concern in the corn complex right now is that elevated input costs will deter plantings. This is especially from the fertilizer costs which are already well above a year ago.

Trade is showing more interest in what the world’s long-term soybean demand will be, manly from China. The USDA is currently projecting Chinese soybean imports of 101 mmt this year, even though China claims the volume will be less. This number is being formulated by historical trends, not what China has booked so far, which the USDA believes is more accurate. The real question is where soybeans will be sourced from, as a large South American crop will take business away from the United States.

Expansion is also being predicted in Brazil corn and soybean plantings this coming year, and with it is higher fertilizer demand estimates as well. Experts believe Brazil will use 43 million tons of fertilizer this coming year, a 6 percent increase from last year. The higher income that was generated by last year’s crops will allow farmers in Brazil to expand fertilizer use on land that is already in production as well. It is not out of the question this will increase production even more than currently being forecast.

One factor that has remained constant with this year’s crops is high variability. Several regions of the United States have experienced less than favorable growing conditions, especially in the Upper Plains and Pacific Northwest. While crop production has been affected in these areas, it is not a total loss.

This is raising questions over how much will be zeroed out this year while other regions will only see a slight reduction to yield. There are several other regions of the United States that are reporting quite favorable yield potential, with several claiming they will see record production. This is generating more confusion in the market and much disagreement with the latest USDA production estimates, both that numbers should be high and lower.

This variability is not confined to the United States. The most uncertainty in the global market is on wheat where countries such as Russia and Brazil claim their wheat crops have been hurt be adverse weather. Canadian officials also believe their wheat production will be slashed this year from drought. Other wheat producers are forecasting larger crops than first predicted though, including Ukraine and Australia. There is little indication these variable crops reports will end in the near future, which is going to keep futures market volatility elevated as well.

What is becoming a greater issue in the global market than supply is logistics. The most talked about of these is in South America where low water levels are hampering export efforts. Another country with logistic issues is China where COVID has caused ports to be shut down in recent weeks and now ships are starting to again be on and off loaded. What is quickly becoming a logistical issue is in country where import taxes have been relaxed and buyers are trying to take in as much product as possible before rates are again raised. The question is what impact these may have on U.S. loadings with the approaching harvest.

Seasonal tendencies are expected to start giving the market some much needed support. Historically soybeans have established a low in August and rebounded from there. In the past six years corn has made a low in late August or early September. We need to remember that every year is different however, and we are already at historically high values on both corn and soybeans. This may limit additional buying interest.

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