Where it Stops, Nobody Knows

Where it Stops Nobody Knows
Justin Huebner, Grain Division Manager

We have a perfect storm occurring in the commodities market after many years where it seemed like all the odds were stacked against us in terms of higher prices.

When the derecho hit in August, we didn’t fully understand the extent of the damage until we got into the harvest season. That’s when we started to see the crop insurance data about the significant number of claims to write off the heavy amount of crop losses. This event obviously had a huge impact on yields and overall supply numbers.

In South America, Brazil was delayed in planting their first crop of soybeans last fall due to excessive dryness. Ironically, now they are excessively wet while they are trying to harvest these soybeans, which is delaying their second-crop corn-planting progress. Significant portions of Brazil have a real threat of running into their hot, dry time when pollination will occur due to the 3-4 week delay in soybean plantings back in November and December. I recently saw a statistic that currently projects roughly 45% of the Brazilian second-crop corn will be planted outside the optimal planting window. Obviously, we won’t know if this will turn out to be a significant issue for a few months, but it is certainly another variable that could have some implications on the world market.

Argentina has been generally dry for most of the growing season so far. Due to this, they are seeing significant signs of drought stress on their soybeans. These weather conditions are consistent with La Niña weather patterns, which we are currently experiencing in North and South America, so this news comes as no surprise.

Speaking of weather, the La Niña situation was expected to end by March or April of this year. However, projections now have this weather continuing into May or June, with some even projecting it to last until October. La Niña weather means above-normal temperatures coupled with below-normal precipitation should be expected for a bulk of the Corn Belt, including Iowa. While it may be months out before it becomes an issue, an extension of this weather into the fall could add another variable to 2021’s market mix.

We cannot afford a poor crop from South America and/or the U.S. in 2021. With significantly low carryout numbers currently projected for corn, soybeans, wheat, cotton, and milo, these crops will need to have big planted acreage numbers and good production numbers to help ease the tight supply going into 2022.

Obviously, the largest caveat is China. We expect them to continue to be big buyers of soybeans and potentially corn to build their depleted reserves, but maybe not to the degree that we saw over the past six months. Even if they back off a bit in 2021, we are still looking at the potential for tight carryout numbers. So, unless we see an unknown variable pop-up that significantly shifts the balance, I expect prices to remain fairly well-supported until we have a much better idea of U.S. production.

While it is always important, the current market conditions make it especially vital to ensure your marketing plan is aligned with the needs of your operation. TRC is here to help you navigate the ever-changing market environment and to make some profitable sales along the way when appropriate for your farm.

If you have any questions about your marketing plans, contact Justin Huebner at 641-628-4167 or [email protected]

Where it Stops, Nobody Knows