The grain markets experienced a drastic move higher from mid-December to early February, and have held on to those gains in choppy, rangebound trade the past several weeks. Corn prices were up over $1.00/bu and soybeans up over $2.00/bu during that stretch. A combination of supply and demand events lined up like stars to cause this to occur.
U.S. corn and soybean yields were both lower than expected last harvest. Argentina has been battling drought during most of their growing season. Brazil, which started out looking very good, has been fighting excessive moisture in the central/northern parts of the country, which have delayed soybean harvest and planting of second season corn Concurrent with these supply issues was a dramatic increase in world feed-grain and oilseed demand, led by big buying from China as they rebuild their swineherd to pre-2018 ASF levels as well as the rest of the world amid a wave of post-Covid demand for food and goods. U.S. domestic demand in feed and crush sectors has also been solid.
Ending stocks of U.S. 2020/2021 corn are currently estimated by the USDA to be 1.5Bln, compared to 1.9Bln last year and 2.2Bln the year before. Many in the trade believe that U.S. corn exports could eventually be increased another 200Mln and would further erode ending stocks to below 1.3Bln. As of March 15, marketing year-to-date corn exports are at 1.18Bln, compared to 630Mln same time last year.
Ending stocks of U.S. 2020/2021 beans are currently estimated by the USDA to be 120Mln, compared to 525Mln last year and 900Mln the year before. This is an incredible stocks drawdown over two years. The export pace on beans has been impressive also as marketing year-to-date is 1.95Bln, compared to 1.12Bln last year.
The quick summary of where we are: U.S. ending stocks are at precariously low levels, which will keep old crop prices higher than new crop as demand rationing may be necessary. Commodity prices are asking for acreage increases worldwide, and the U.S. in particular needs to have a big corn/soy crop this year. Any problems with the U.S. growing season could push prices higher.