The U.S. Department of Agriculture estimates U.S. soybean production will reach a record 124.9 million tonnes in 2024-25.

That has pushed prices 18 per cent below the average estimated cost of production in that country.

“We haven’t seen that level of unprofitability since 2018-19,” DTN lead analyst Todd Hultman said during the latest installment of the 2024 DTN Ag Summit Series.

“That’s the time we were in a trade dispute with China, and they quit buying soybeans for a while.”

He believes today’s scenario is “nowhere close” to the bearishness of that situation because there is still reasonably good demand for soybeans.

“The worst thing to happen to a market is losing demand. Supplies usually work themselves out over time,” said Hultman.

The USDA is forecasting 15.25 million tonnes of ending stocks, compared to 24.49 million tonnes in 2018-19.

Hultman noted that the soybean market still rallied during the tariff dispute with China, climbing 18 per cent from the lows set in 2018 and 25 per cent from the lows of 2019.

A 19 per cent rally from today’s values would take soybean cash prices to US$10.92, bringing canola along for the ride.

He thinks that is a conservative estimate based on the volatility witnessed in previous years.

“Hopefully we’re near the low end of the pain point here,” he said.

Another glimmer of hope is that yield and production numbers are still up for debate. Nothing will be firm until October, so there is still time for the crop to get smaller on paper.

Hultman thinks there is “some reckoning to do” with this year’s crop in terms of damage caused by wind, hail and flooding.

DTN’s August yield estimates are lower than the USDA’s in all the important soybean-growing states, such as Illinois, Indiana and Iowa.

The USDA’s first stab at Brazil’s production could be high as well, with a record 169 million tonnes forecast.

He has heard reports that farmers in Mato Grosso may be cutting back on acres due to the low prices.

New crop sales of U.S. soybeans have been concerning, starting out the year down 45 per cent compared to last year.

However, prospects for future sales have improved markedly because the f.o.b. price for U.S. soybeans in New Orleans is now 57 cents per bushel cheaper than Brazilian soybeans in Paranagua.

“We have seen soybean sales pick up,” he said.

The U.S. recently sold 4.85 million bushels of new crop soybeans to China and another 8.8 million bu. to Mexico.

Soybean processors are making big money because the value of the meal and oil they produce are holding up, while soybean values are dropping.

Crush activity in 2023-24 was up 5.2 per cent compared to the previous year.

However, there are concerns on the horizon about that portion of soybean demand. Crush premiums look like they could start shrinking in January 2025.

That is when proposed revisions to California’s low carbon fuel standard could kick in, which would see a 20 per cent cap on the amount of soybean and canola oil that could be used in the biodiesel and renewable diesel sold in that important market.

“I’m sure that has been a big disappointment to a lot of folks,” said Hultman.

If it happens, it would be a big blow to the soybean sector, which has become increasingly reliant on that market.

“We need profitability from the biofuel sector to counter the decade-by-decade loss of exports in the world to basically Brazil and Russia,” he said.

Hultman’s parting advice to farmers is to keep in mind that rallies still happen in years of excess supplies.

He thinks that will happen once the market stops focusing on the big harvest and starts appreciating the strong demand dynamic out there.

“Surprises happen,” he said.

“You just never know what’s going to be around the corner.”

Contact sean.pratt@producer.com

“We are already down to extremely cheap price levels on corn and beans,” said DTN lead analyst Todd Hultman.

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“It’s just hard for me to imagine much more downside risk, but unfortunately I can’t guarantee that.”

The problem is that market speculators keep driving prices lower.

The total combined speculative position for corn, soybeans and Chicago wheat is 351,482 contracts net short, which remains near the record level set in April 2019.

“The specs in the market are already so heavily invested, how much more can you really push this market down?” said Hultman during a DTN webinar about the U.S. Department of Agriculture’s latest World Agricultural Supply and Demand Estimates (WASDE) report.

Prices have exceeded expectations to the downside, but the August WASDE didn’t help matters.

The USDA is now forecasting a record 4.59 billion bushel U.S. soybean crop, bumping up both its harvested acre and yield estimates from the July report.

Fortunately, domestic crush margins are still “extremely enticing” as crushers earn US$13.41 for the oil and meal they get from every bushel of soybeans, which is costing them $9.72.

New crop soybean exports are starting out in a hole with sales down 51 percent from a year ago early in the 2024-25 marketing campaign.

However, U.S. soybean prices for October in New Orleans are now 41 cents per bushel below Brazilian soybeans in Paranagua, so sales should start picking up.

November soybean futures were below $10 per bu. as of Aug. 12, the lowest level in almost four years. That is well below the estimated cost of production of $11.90 per bu.

“Historically speaking, this is a very cheap level,” said Hultman.

Prices are further below the cost of production than they were in 2018 when China had tariffs in place on U.S. soybeans.

However, speculators are still heavily short and may add more to that position after the USDA’s bearish report. Hultman said it is hard to imagine speculators changing their minds anytime soon due to the ideal August weather conditions.

The one thing that might move the market is the potential for a smaller-than-anticipated Brazilian soybean crop.

The USDA is forecasting a 2024-25 crop of 169 million tonnes, which would be a 10 per cent increase over last year.

However, Hultman has heard reports that farmers in that country might decrease acres when it comes time to plant in September due to the lacklustre prices.

The USDA is forecasting a record U.S. corn yield of 183.1 bu. per acre. Production is pegged at 15.15 billion bu., which is not a record, but it is a bin-buster.

Exports are forecast at 2.3 billion bu., up from last month’s 2.23 billion estimate.

“With these cheaper prices, they’re getting a little more optimistic about the export business,” he said.

Corn ending stocks are pegged at 2.07 billion bu., the largest in six years. Any time that number tops 2.0 billion bu. it is bearish.

The U.S. has already shipped out 1.96 billion bu. of corn as of Aug. 1, up 33 per cent from a year ago but slightly below the four-year average.

“It’s much easier to sell and export cheap corn that’s now below $4 than it was when it was $6.50,” said Hultman.

Ethanol margins are still very attractive with plants deriving $6.08 of value from selling ethanol, distillers grain and corn oil from every bushel of corn that is costing them $3.66.

He said speculators in the corn market have been encouraged to hold onto their short positions by the Federal Reserve Board, which is trying to keep prices in check by increasing interest rates.

“It’s obviously a very heavy weight on our grain prices,” said Hultman.

He is hoping grain markets have reached the end of the price pendulum.

December corn futures values are 19 per cent below the USDA’s estimated cost of production for the crop, which is reminiscent of 1985 when he got into the grain marketing business.

He thinks that is ridiculous because there were “mountains” of corn at that time and not nearly enough demand, a far worse situation than exists today.

“You would think we’re getting down to the lows here somewhere, but technically of course we’re not seeing any signs of that just yet,” said Hultman.

However, there are signs that the wheat market may be bottoming out. Kansas City wheat has made a few attempts to set new lows, but those attempts keep getting rejected.

“That seems to be some of the earliest indications of support,” he said.

The USDA’s new U.S. wheat production estimate is 1.98 billion bu., which is slightly lower than the July forecast.

The winter wheat crop appears to be getting bigger, while the spring wheat crop is shrinking due to production problems in Washington state, where it has been dry.

Global wheat ending stocks (excluding China) are forecast at 4.49 billion bu., the lowest in 17 years.

That is not a “dangerously tight” supply, but it should be providing some support to wheat prices.

Contact sean.pratt@producer.com

“The bottom line is, it comes back to Russia. Are they going to be able to have a big enough crop again this year to dominate world exports and hold prices down, or not?” DTN lead analyst Todd Hultman said during a recent webinar.

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“That’s going to be the key.”

The answer depends on the upcoming weather, but there have been early indications that Russia’s crop is in trouble.

SovEcon, a leading Black Sea agricultural market research firm, recently dropped its Russian wheat forecast by 3.4 million tonnes to 89.6 million tonnes.

“After a favourable winter, Russia was poised for another large wheat harvest,” SovEcon head Andrey Sizov said in an email update.

“However, the past two months have seen a significant downturn in weather conditions, including abnormal warmth, drought and recent frosts.”

Russia harvested 92.8 million tonnes last year, while the five-year average is 86.7 million tonnes.

“The primary reason for the forecast reduction is the persistent dry conditions in southern Russia, which has received only 20 to 40 per cent of its typical rainfall in recent months,” Sizov stated.

Rain is in the forecast for that region, but it is unlikely to significantly reverse the deficit.

“Southern Russia is responsible for approximately 40 per cent of the nation’s total wheat production,” he said.

His production forecast includes the effects of the frosts that occurred April 30 and May 1 in the central and southern regions, where temperatures dipped as low as -5 C.

“These conditions were especially harmful to already vulnerable wheat crops in the south due to earlier droughts,” said Sizov.

But it does not include the subsequent frosts that happened May 9-10, so further downward revisions are possible.

MarketsFarm analyst Bruce Burnett said the most recent frosts appear to be serious.

“We’re seeing a response in the wheat markets to this,” he said.

The July futures contract in Minneapolis closed at US$7.20 per bushel on May 10, up from $6.40 a few weeks ago.

He thinks some winter wheat fields in Russia’s black soil zone may need to be replanted to other crops. Spring wheat could be an option, but that comes with a yield penalty.

MarketsFarm is forecasting 87 million tonnes of Russian production.

Hultman said the USDA blindsided the trade with its latest WASDE forecast calling for 1.86 billion bushels of U.S. wheat production, a modest 2.5 per cent increase over last year.

“It’s maybe a little bit surprising to me that we’re not expecting a whole lot more production out of this year’s wheat crop,” he said.

The U.S. hard red winter wheat crop is in much better shape than it was this time last year.

However, the USDA’s forecast for soft red winter wheat came in well below trade expectations.

The USDA is forecasting 766 million bushels of U.S. wheat ending stocks in 2024-25, up from 688 million bu. this year.

But global ending stocks (excluding China) are forecast at 4.45 billion bu.

“We’re looking at the lowest total in 17 years,” said Hultman.

However, he noted that ending stocks this year will be the lowest in 15 years, and that hasn’t seemed to help prices at all.

Again, it all comes back to Russia, which has swamped the export market with product in 2023-24.

If Russia has a short crop in 2024-25, it will greatly help exporters in other regions of the world.

New crop wheat sales in the United States are already much higher than they were at the same time last year.

Outstanding wheat sales for the next marketing year totalled 2.96 million tonnes as of May 2, according to the USDA.

That is up 82 percent over the same time last year.

“Buyers are beginning to take advantage of lower prices and securing early shipments for 2024-25,” U.S. Wheat Associates said in a recent blog.

Hard red spring wheat sales are leading the way at 984,100 tonnes, a 121 per cent increase.

Sales of new crop hard red winter wheat came in at 670,300 tonnes, a 139 per cent improvement.

There are 70,000 tonnes of new crop durum on the books, a 90 per cent hike.

However, Burnett noted that 2023-24 was an exceptionally bad year for U.S. sales.

The country has shipped out 17.07 million tonnes of the commodity with about one month left in the crop year.

That is going to fall well short of the USDA’s initial forecast of 19.73 million tonnes.

Burnett said the strong early-season new crop sales are an indication that exporters are more comfortable with supplies.

The USDA is forecasting 705 million bu. of hard red winter wheat production, up from 601 million bushels last year.

That doesn’t bode well for Canada’s growers.

“That will have an impact on spring wheat because we will be competing against them on some International markets,” he said.

Contact sean.pratt@producer.com

Freight on board (f.o.b.) soybean prices for July have dramatically narrowed between Brazil and the United States.

Related stories:

• Global soybean glut could pressure canola prices
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Soybean prices in Paranagua that were US$1.75 per bushel lower than those in New Orleans in February are now a mere 12 cents cheaper.

“It’s uncommonly early for those two prices to converge this quickly,” DTN’s lead analyst said during a recent webinar about the latest U.S. Department of Agriculture’s WASDE report.

It is reminiscent of 2020, when corn and soybean prices started to rapidly escalate after the world discovered that Chinese demand was much stronger than anticipated.

“When I start to see this situation with the Brazilian price, it makes me think very much of that,” he said.

That glimmer of hope was a nice respite from an otherwise bearish discussion about the May WASDE report.

The USDA is forecasting 445 million bushels of U.S. soybean ending stocks in 2024-25, up from 340 million bu. in the current crop year.

“If that works out to be true, it will be the highest ending stocks for soybeans in five years,” said Hultman.

The USDA is forecasting an average farm price of $11.20 per bu. in 2024-25, down from $12.55 this year.

Things get really scary looking ahead, with the USDA forecasting global ending stocks of 128.5 million tonnes in 2024-25, up from 111.78 million tonnes this year.

That is based on an estimated Brazilian crop of 169 million tonnes, which would be 15 million tonnes more than this year.

However, Hultman said that’s getting way ahead of the game because the USDA is still trying to get a handle on this year’s Brazilian crop. Its 154 million tonne estimate is well above Conab’s 146.5 million tonnes.

He doesn’t think the USDA has properly accounted for losses caused by recent flooding in southern Brazil.

Another concern for the upcoming crop is that soybean crush margins are shrinking because soybean oil demand from the biofuel sector hasn’t been as strong as anticipated.

U.S. soybean exports have also been lacklustre, with 1.42 billion bu. shipped through May 2, an 18 percent decline from the same time last year.

The USDA is forecasting 2.1 billion bu. of corn ending stocks, which is below trade expectations of 2.25 billion bu.

“This is a little bit of a friendly report,” said Hultman.

The average farm price for 2024-25 is forecast at $4.40 per bu., down from $4.65 this year.

World ending stocks for 2023-24 are estimated at 313.08 million tonnes, but that is based on 122 million tonnes of production in Brazil and 53 million tonnes in Argentina.

Conab is pegging Brazil’s crop at 111 million tonnes, while the Buenos Aires Grain Exchange believes farmers in Argentina will harvest 46.5 million tonnes.

So, there is much reconciling ahead in the coming months.

The USDA is forecasting 312.27 million tonnes of corn ending stocks in 2024-25, which would be similar to the past three years. But again, that is way out on the horizon.

The United States has exported 1.356 billion bu. of corn as of May 2, a 30 per cent increase from one year ago. The USDA believes exports will hit 2.15 billion bu. by the end of the year.

However, ethanol margins are concerning. The difference between corn’s processing value and the price of corn in Iowa has shrunk to $1.51 per bu. from more than $3 last fall.

The good news is there has been a nice rebound in new crop corn prices since late February, when prices were extremely low.

That is due in a large part to speculators liquidating their short positions in the market because of South America’s weather problems.

Contact sean.pratt@producer.com

DTN lead analyst Todd Hultman told growers attending the 2024 Commodity Classic conference that corn ending stocks in the United States are forecast to be about the same level they were in the 2015-20 period.

Related stories:

• Corn and soybean prices may be ready to rally
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The U.S. Department of Agriculture believes stocks are heading to 2.53 billion bushels in 2024-25, which is where they were during the period when spot corn prices were in the US$3 to $4.50 range.

There has been considerable inflation in the interim. Production costs for the upcoming season will be about 32 percent higher than what they were back then.

That is why he is forecasting corn prices in the range of $4 to $5.25 per bu. Prices were hovering near the bottom of that range during his March 1 presentation at the conference.

“That’s why I keep expecting prices to find some long-term support down in this region,” said Hultman.

The top end of the range would require some sort of weather disaster in an important growing region.

“If you can get anything near or slightly above $5 per bu. for corn this year, you’re probably going to be doing pretty good,” he said.

U.S. soybean ending stocks are forecast at 435 million bu. in 2024-25, which is in line with where they were during the 2015-20 period when spot prices were in the $8 to $10.70 range.

The cost of production for soybeans has increased 31 percent over that time, so he is forecasting 2024-25 spot prices in the $11 to $14 range.

His floor is a little higher than a 31 percent increase because there was demand stress in the 2015-20 period due to the trade war with China. That stress doesn’t exist today.

However, he noted that there is also limited bullish potential for the crop.

“Anything above $12.50 to $13 you have to take seriously,” Hultman told his farmer audience.

Al Kluis, a trader with Kluis Commodity Advisors, delivered a similar message in his presentation.

“I don’t know if we’re at the bottom of the market, but we’re close,” he said.

He is forecasting 91 million acres of U.S. corn and an average yield of 176 bu. per acre in 2024. His carryout number is 2.39 billion bu., for a 16.5 percent stocks-to-use ratio.

Kluis shudders to think what will happen if the USDA is correct and yields end up at 181 bu. per acre.

“Watch out, we could see extremely low prices this fall,” he said.

His soybean forecast calls for 87 million acres of the oilseed, an average yield of 51 bu. per acre, carryout stocks of 376 million bu. and an 8.6 percent stocks-to-use ratio.

“The outlook for soybeans is much better than it is for corn,” he said.

“I see a lot more risk for lower corn prices next fall than soybeans.”

Kluis noted that farmers will likely be in their fields earlier than usual this spring, which tends to favour more corn and spring wheat acres.

If soybean plantings come in a couple of million acres below his initial estimate and yields drop to 50 bu. per acre, “things could get exciting.”

His slide of important dates to watch garnered plenty of attention from the farmers in attendance.

“That brings the cameras out,” he said.

March 28, May 7, June 21 and July 3 were the important dates Kluis is circling on his corn and soybean charts.

He did not mention why those dates are important or whether he expects them to have a bullish or bearish influence on the market.

Contact sean.pratt@producer.com

“If you want to hang onto one of them, soybeans definitely have the better bullish potential,” he told farmers attending the 2023 DTN Virtual Ag Summit.

The United States Department of Agriculture is forecasting 245 million bushels of U.S. soybean ending stocks in 2023-24.

“The case for soybeans is much different than corn,” he said.

“We do not have a big endings stocks estimate.”

He is forecasting an average spot soybean price of US$13.50 per bushel for the year, with a range of $12 to $15.

Production costs for the crop are estimated at $12.30 per bu., so there should be plenty of opportunities for profit.

U.S. farmers harvested a record 15.23 billion bushels of corn and are expected to finish the year with a robust 2.13 billion bushels.

It reminds Hultman of the 2014 through 2020 era, when spot corn prices were in the $3 to $4.50 per bu. range.

“It is not remembered very fondly by a lot of our farmers because lots of times prices were below the cost of production,” he said.

Today’s production costs are about 28 percent higher than they were back then, so prices will also be higher.

He is forecasting a season average of $4.80 per bu., with a range of $4.25 to $5.50.

“That’s my best guess for now,” said Hultman.

Exporters shipped out 8.71 million tonnes of the crop as of Nov. 30, up 30 percent from a year ago.

Sales to Mexico have been particularly strong, which is a good thing because transportation to that market is not reliant on the Mississippi River or the Panama Canal, where low water levels are restricting trade.

However, corn prices in China have been falling, indicating a lack of urgency in demand in that market.

“I don’t think we’re going to have a situation like we did in 2020 when China comes up with huge, unexpected purchases,” he said.

Corn prices have been rising in Brazil, where markets are concerned about the hot and dry conditions in the centre of the country. The July futures price works out to about $6.19 per bu.

The USDA is forecasting 129 million tonnes of production in Brazil, but that might be on the high end unless the country receives ample rains in January and February.

Argentina is off to a “very good” start and is forecast to produce 55 million tonnes of the crop, a 62 percent increase over last year.

Soybean prices on China’s Dalian Exchange have been rising since May, with the 100-day average equal to $16.17 per bu.

That is despite huge imports from Brazil.

“To me, that’s a very strong sign of demand,” said Hultman.

Prices started to tail off recently, so the highs might be in for the Chinese market, depending on what happens with rainfall in Brazil for the January-February period.

He thinks now might be some of the best opportunities for U.S. soybean sales to that market, yet prices have not been climbing.

The U.S. exported 18.3 million tonnes of soybeans through Nov. 30, 13 percent below last year’s pace.

But sales to domestic crushers have been strong thanks to attractive crush margins. The January crush premium is hovering around $2.59 per bu., which is about double the normal level.

“It has been a very bullish source of new demand for the soybean market,” said Hultman.

The biofuel sector consumed 1.21 billion pounds of soybean oil in September, up 29 percent from a year ago, according to the U.S. Energy Information Administration.

Renewable diesel capacity was up 67 percent that same month and five more new plants are expected to be operational in 2024.

“This continues to be a market with a phenomenal growth story,” he said.

Hultman said his soybean price would be even more bullish if Brazil wasn’t looking at a possible record crop in 2024.

Contact sean.pratt@producer.com

The U.S. Department of Agriculture raised eyebrows with its November World Agricultural Supply and Demand Estimates report.

“It was a surprise today, I have to admit,” said DTN lead analyst Todd Hultman.

The big shock was contained in the new U.S. corn average yield estimate of 174.9 bushels per acre, up from October’s 173.

That is expected to result in a record of 15.234 billion bu. of U.S. corn production, a 170 million bu. increase over its October estimate.

The USDA had to boost its feed, ethanol and export demand estimates to mop up that newfound corn.

That included bumping up corn exports to Canada by one million tonnes to 3.2 million tonnes, which will provide stiff competition to farmers selling their feed barley.

U.S. corn ending stocks for 2023-24 also grew to 2.156 billion bu., the highest level in seven years.

That pushed down its forecast for the average farm price by a dime to US$4.85 per bu.

December corn futures fell following the report, matching the 2023 lows of about $4.68 per bu.

Arlan Suderman, chief commodities economist with StoneX, has an even more bearish outlook for corn.

He thinks the average yield will continue to climb in future USDA reports until it reaches 175.7 bu. per acre.

Suderman also believes that feed and export demand will be much lower than the USDA is forecasting.

U.S. corn exports to date are 48 million bushels below the pace needed to meet the USDA’s numbers.

He believes ending stocks will be 2.5 billion bu., a whopping 342 million bu. higher than the USDA is estimating.

That would drive the average cash farm price down to $3.90 per bu., which would be even more of a bearish factor for Canadian feed barley prices.

Hultman is in the opposite camp. He expects a post-harvest price rally because of strong export demand for U.S. corn and the early-season weather woes in Brazil.

The USDA report was more neutral for soybeans. The agency made slight upward adjustments to U.S. soybean production and ending stocks, but supplies are still going to be tight.

It did not make any adjustments to Brazil’s 2023-24 production estimate despite hot and dry conditions in the central and northeast part of the country and excess moisture in the south.

“Frankly, I think the market is much more concerned about that than anything they saw in today’s report,” said Hultman.

July soybean futures finished the day at $13.74 per bu. What is remarkable about that is that speculators are only net long 16,000 contracts, which isn’t much.

“It doesn’t have the bearish risk to it, as say other situations where we have speculators heavily involved in the long side of the market,” he said.

“It’s impressive to see prices challenging $14 without much speculator involvement. That, to me, is the sign of a strong, bullish market.”

Suderman’s soybean yield and production numbers are slightly higher than the USDA’s. But he has a smaller export number, so the two ending stocks estimates are similar. The USDA is at 245 million bu. and he is forecasting 248.

Soybean exports are about 160 million bu. behind the pace required to meet the USDA’s number. But that deficit will likely be cut in half because of big recent sales.

Suderman said the soybean outlook depends a lot on what happens in Brazil, which is off to a shaky start.

The USDA did not make many changes to the U.S. wheat balance sheet other than increasing ending stocks by 14 million bu. to 684 million bu.

That drove down the estimated 2023-24 farm price by a dime to $7.20 per bu.

Supplies are still not super bearish. It is demand for U.S. wheat that is the problem.

“We just continue to struggle to find any export business,” said Hultman.

Competition from cheap Russian wheat has been overwhelming in global markets and that situation just got worse.

The USDA now estimates Russian wheat production at 90 million tonnes, up from its October forecast of 85 million tonnes.

The new estimate is more in line with forecasts from the Russian government and private analysts.

World wheat ending stocks excluding China are forecast at 124.8 million tonnes, the lowest level in 15 years despite the increase in Russia’s production.

“That should count for something if we can ever get some demand generated,” said Hultman.

He noted commercials are net long 29,527 contracts in December Kansas City futures, while non-commercials are net short 27,343 contracts.

The non-commercial speculators will likely have to cover their short position at some point and that could lead to a rally, but it has been a long time coming.

It is already much drier than normal in central and northeastern Brazil and the forecast calls for more of the same.

A probability forecast prepared by the Columbia Climate School International Research Institute for Climate and Society shows a 45 to 60 percent chance of below normal precipitation for that area for the critical November-through-January period.

The dry area includes eastern Mato Grosso, a state that accounts for 27 percent of Brazil’s soybean production.

The outlook does not bode well for Brazil’s soybean crop, which is currently being planted. But it is an even bigger threat for the corn crop that will follow, according to analysts.

“The corn crop really relies on the stored soil moisture to get through its season,” said DTN lead analyst Todd Hultman.

“We see this as a risk more to the second corn crop than we do the soybean crop the way things are setting up right now.”

That view is shared by Michael Cordonnier, analyst with the Soybean and Corn Advisor newsletter.

“It is much worse for safrinha corn,” he said.

That is Brazil’s second crop of corn, which is planted on the heels of the soybean harvest. It accounts for 75 percent of the country’s total production.

It now appears that the safrinha corn will be late getting in the ground because of the delayed soybean planting. Any corn planted after February will have reduced yields.

Cordonnier just lowered his corn estimate by two million tonnes to 123 million tonnes. That is well below the United States Department of Agriculture’s forecast of 129 million tonnes.

But both estimates are way above Conab’s forecast of 119 million tonnes.

Cordonnier said Conab has close ties with Brazil’s national weather service and probably knows something other analysts do not.

He said this is the first of what he anticipates will be a series of reductions, which eventually could bring his forecast down to Conab’s number.

But he wants to wait and see what happens with soybean planting over the next couple of weeks.

Cordonnier also reduced his soybean number by two million tonnes to 160 million tonnes. That is identical to Conab’s estimate but below the USDA’s forecast of 163 million tonnes.

Current weather condition can be best described as two extremes. The central and northeast has been hot and dry, with temperatures exceeding 40 C on most days.

“I would say about 30 percent of the soybean acreage in Brazil are in this hot and dry area looking for more rain,” he said.

Some growers are already replanting their crops.

There has been some improvement in rainfall recently, but multiple forecasts are calling for a return to dry weather in the weeks and months ahead.

And there could be a premature end to the summer rainy season because of El Nino.

“So late-planted soybeans could have a problem on both ends, the front end and the back end,” said Cordonnier.

It has been the opposite problem in the south of the country, which has been “deluged by rains.”

Seeding in Rio Grande do Sul, which is the third biggest soybean producing state, is just three percent complete compared to the usual 18 percent for this time of year.

Hultman said he is not concerned about the soybean crop because it is grown during the rainy season.

“The average monthly (rainfall) total is so high that we can be below normal and still have plenty enough for a good soybean crop in early 2024,” he said.

But Cordonnier said all it takes is one week of dry weather during the December-January pod-filling period to reduce yields.

If Brazil has a short crop, China will turn to the U.S. for soybeans, boosting prices in that important market.

The other factor to consider is that Argentina’s crushers will run out of soybeans in December and the new crop won’t be available until March.

“Once the soybeans start coming online in Argentina, the crushers are going to be absolutely desperate for every soybean they can get,” said Cordonnier.

That is why he believes the soybean complex has better potential for a rally than corn. But if Brazil’s safrinha corn crop gets off to a rough start, then “all bets are off.”

Contact sean.pratt@producer.com

That would have signaled a bottoming out in prices and a bullish change in short-term momentum.

That did not happen. Prices continued to fall, closing at 51.42 cents Oct. 31. However, he remains convinced a floor is in sight.

Related stories on this issue:

• Man. soy yields near average
• Canola futures sit on the couch

Prices have been falling since peaking at 65.58 cents July 24.

The retraction amounts to about two-thirds of the original 21.11 cent rally from the May 31 low of 44.47 cents.

Hultman said a two-thirds pullback is a normal downward adjustment to a huge rally such as what the bean oil market experienced earlier this year.

If prices have bottomed and start to climb, it should benefit the canola market due to the high oil content of that crop compared to soybeans, he said.

What gives him hope is that palm oil is showing signs of support, and it is the commodity that often leads the charge in the veg oil market.

The market is anticipating a palm oil rally due to El Nino, a weather event that usually results in reduced rainfall in Malaysia and Indonesia, hampering palm oil production in those countries.

“We’ve certainly been looking for that possibility to develop, but we haven’t seen much evidence of it yet,” said Hultman.

He thinks the downward slide in soybean oil prices could be related to disappointing use in the renewable diesel sector.

The entire biofuel sector consumed a record 1.27 billion pounds of the oil in July, but the August number fell to 1.197 billion lb.

September’s and October’s numbers are not yet available, but Hultman thinks they will continue to decline.

There has been a big drop in biodiesel RIN values starting in early September, indicating that the industry is getting close to reaching mandated volumes for the year.

He has also seen an unverified social media report that the United States is importing renewable diesel from Germany and Singapore.

“If that’s true, that would also take some of the wind out of the soybean oil and canola price,” said Hultman.

Rabobank senior grains and oilseeds analyst Owen Wagner said in a recent webinar that U.S. renewable diesel production has “gotten a little bit ahead of itself.”

That is because the U.S. Environmental Protection Agency’s biofuel mandates for 2023, 2024 and 2025 were surprisingly low. It has created a “glut” of renewable diesel, which is “weighing down” soybean oil prices, he said.

Fastmarkets analyst Eduardo Tinti offered up another theory during a recent webinar on what could be pressuring global soybean oil prices.

Brazil reduced its national biodiesel mandate to 10 percent from 12 percent for 2022 and the first half of 2023 in response to a disappointing 2022 soybean harvest.

The biodiesel sector is a big consumer of Brazilian soybean oil.

“What this did is it created some spare soy oil available, which was diverted to the export sector,” he said.

Every one percentage point drop in the biodiesel mandate results in 400,000 tonnes more soybean oil for export, so there were an extra 800,000 tonnes.

Brazil also harvested a record crop of 155 million tonnes of soybeans in 2023, while Argentina’s production of 21 million tonnes was half of a normal crop.

As a result, Brazil’s share of global soybean oil exports has climbed to 25 percent in 2023, up from 12 percent two years ago.

Argentina has maintained its rank as the world’s largest soybean oil exporter with 37 percent market share, but that is down from 44 percent two years ago.

The U.S. Department of Agriculture is forecasting another record Brazilian crop of 163 million tonnes in 2023-24 and a big rebound in Argentina to 48 million tonnes.

Contact sean.pratt@producer.com

CoBank is alerting U.S. grain elevators storing large volumes of wheat that there is potential for a “sharp rally in wheat prices” in the year ahead.

“The flood of cheap Russian wheat into the global market may have created a false sense of security in the world wheat market,” CoBank grains and oilseeds economist Tanner Ehmke said in a news release.

“The greatest margin risk to storing wheat is the shrinking world wheat crop outside of Russia and China, which leaves the market vulnerable to supply shocks and extreme volatility in wheat prices.”

The world wheat stocks-to-use ratio, excluding Russia and China, is nearly the tightest on record.

“Drought has substantially reduced wheat supply in Argentina, Canada and Australia,” CoBank said.

Meanwhile, Ukraine’s wheat faces numerous obstacles getting to market.

North Africa’s poor wheat harvest will create greater demand for imports, as will India’s ban on white rice exports, which is shifting demand from rice to wheat in markets such as Southeast Asia and Africa.

China will likely be in the market for more wheat as well due to quality problems with its harvest.

CoBank said Russia’s cheap wheat is due in part to 30 percent year-to-date devaluation of its currency compared to the U.S. dollar.

“(That is) putting Russian exports on sale and pushing down world wheat prices,” the bank said in its news release.

DTN lead analyst Todd Hultman thinks there could also be an ulterior motive behind Russia’s cheap wheat.

He believes Russia is driving down the price of its grain to curry favour in African nations for strategic military purposes.

In a recent column he alleged that Russia’s cheap wheat policy is a “humanitarian cover for malevolent goals that has expanded Russia’s influence in Africa and at the United Nations.”

Russia’s discounted wheat is making wheat from other exporting regions uncompetitive.

The U.S. Department of Agriculture is forecasting the smallest U.S. wheat export program in 50 years in 2023-24.

Prices are no longer covering the average cost of production, which is estimated at around US$9 per bushel. That is despite U.S. wheat stocks being at the second lowest level in 10 years.

In an interview, Hultman said prices should be 50 cents to $2 per bu. higher than they are today given the stocks level.

With the war in Ukraine, he was anticipating a shortage of wheat and rising prices. However, the opposite happened, with the cheapest world wheat prices in more than two years.

Hultman recently read the transcript of testimony from a senior official with the Africa Center for Strategic Studies, a research group within the U.S. defense department, which helped shed some light on that conundrum.

Joseph Siegle, research director for the organization, told the U.S. House of Representatives in September 2022 that Russia has deployed the Wagner Group, a mercenary army, in at least six African countries.

“Moscow has followed a pattern of swooping in with irregular forces to prop up politically isolated authoritarian leaders facing crisis in geostrategically important countries,” Siegle said in his testimony.

“These leaders are then indebted to Russia, which assumes the role of regional powerbroker.”

The testimony explains that one of Russia’s objectives is to establish a naval presence along the southern Mediterranean Sea near the Suez Canal and the strait between Yemen and Djibouti, two important chokepoints for international trade.

“No wonder Russia bends over backward to be the cheap wheat provider to Egypt and why it has shown special attention to Libya, Egypt and Ethiopia,” Hultman said.

And the country has plenty of wheat to sell at those depressed prices. Russia’s exports hit a record 46 million tonnes in 2022-23 and the USDA is forecasting a new record of 49 million tonnes this year.

The European Union is forecast to be the next biggest competitor at 37.5 million tonnes.

Hultman said Russia’s cheap and abundant wheat is the primary bearish factor that is forcing U.S. farmers to switch to growing more corn and soybeans.

“Some will say that’s just how markets work. Russia is being rewarded because it’s the low-cost producer, and U.S. farmers aren’t keeping up,” he said.

“I would argue Russia is not a market-based producer but is politically using cheap wheat as a tool for advancing military goals that are dangerous to international trade and to the African nations Russia pretends to serve.”

He added that it is difficult for western nations to make a fuss about what is happening because they do not want to be perceived as depriving poor nations of cheap grain to help combat a mounting hunger crisis.