This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Grain and oilseed markets traded with light volume most of the week without being able to get much traction in either direction. We are in the early stages of harvest in the US and there is not much new in the headlines. While we are expecting (and/or hoping) that we have seen the highest yield estimates already and they will get lower, we are all still expecting a record crop in both corn and soybeans. Hopefully the market has priced in a bigger crop than what we will have but while we do expect some upside in the market, we also expect that upside to be limited. We are not anywhere close to a disaster or concerning carryout, just may be less than what was priced in.
One thing that could change that is a weather problem in South America. It is very dry throughout much of Brazil right now. The planting window is open for Brazilian farmers to begin planting, but they wait on the monsoonal rains to start. The market is paying attention, but it will be several weeks before there will be much more than just a little bit of concern. Right now, there is still plenty of time to get the soybean crop planted and plenty of growing season ahead. However, the later the crop gets planted, the longer the window for US beans to be competitive in the world market. Even more importantly though is that the later the soybeans are planted, the more risky the second crop corn becomes. The climate is tropical so cold weather is not the limiting factor. The limiting factor is the end of the monsoonal rains. Like all weather events, there is no guarantee of when the rains will stop. But the later the corn is planted, the more likely the rains will stop before the crop has reached maturity. Safrinha corn is what they call the second crop corn in Brazil. Safrinha literally means off season. There used to be just a few acres planted after beans but now the safrinha corn crop is bigger than the early crop of corn in Brazil. Their domestic demand has also grown so the safrinha corn is the corn that goes to the export market. If that crop gets cut dramatically, it will bring significantly more demand for US corn as there are fewer alternatives now. This is a scenario that could lead to a significant market rally, but we are still a ways from knowing if this will come to pass.
Wheat has finally shown some strength of late driven by several factors. Dry weather in Ukraine, Southwest US and France is making headlines again. The Russian Ag Department slightly raised their production estimate but that change just puts it at the same level USDA had it estimated at which is down significantly from last year’s crop. Market still trying to gauge if Russia is going to have to slow exports to help tackle domestic inflation. The territory that Ukraine recently captured from Russia is major production area and so there are questions whether that wheat will be able to be harvested. The market is also pricing in the risk of escalation.
In summary, we look for markets to remain fairly quiet as we move through harvest. We are watching developments in Ukraine for the risk of escalation and weather developments in Brazil. We get the quarterly stocks report from USDA on Sept 30th and then the October supply and demand update on Oct 11th. That report will include some harvest data.