November is traditionally a quieter month for grain trade as harvest wraps up. This year, however, looks to be quite different.
Since August, grain prices have found price strength due to smaller than expected U.S. supplies as well as strong export demand. Prices have reached important price levels with corn futures above $4 a bushel, soybean futures near $11 a bushel and Chicago wheat futures over $6 a bushel. Whether or not this trend can continue depends largely on continued Chinese demand and global weather in the coming months.
Chinese demand for grain has been strong as China recovers from COVID-19, are working toward fulfilling Phase I trade obligations, and are refilling grain reserves that had been drawn down over the years. China also has strong demand for corn and soybeans thanks to the rebuilding of the hog herd in the aftermath of African swine fever.
In mid-October, United States export sales to China were at 10.1 million tons. The most recent U.S. Department of Agriculture report has not yet acknowledged this, still stating that the U.S. will export 7 million tons of corn to China. Recently, there were rumors circulating that China may be looking to secure as much as 30 million tons of imported corn, with 20 to 24 million tons of it coming from the U.S. If this should happen, that would be new demand for U.S. corn. So much so that it would take U.S. ending stocks from 2.1 billion bushels down to 1.5 to 1.8 billion bushels (depending on how much is actually sold and shipped).
Growing conditions in South America will also be monitored closely. The start of the South American growing season was met with parched soils. Quite frankly, the world needs South America to have a near perfect crop to meet global demand for soybeans and corn or global ending stocks are at risk of being drawn lower. In the upcoming USDA reports it will be important to monitor global ending stocks. If the USDA should show lower production in Ukraine, in China, and even here in the U.S., along with improved U.S. export demand, global ending stocks would likely decline from the current number of 300.45 million metric tons. It feels like the world already knows this though, hence the price rally, and strong export pace that started in August.
And lastly, expect market volatility due to the elections. This volatility may have ripple effects felt around the world depending on the outcome. Be mindful of your marketing plan. Be ready for scenarios that may unfold that could send prices dramatically higher or lower. Be thinking of your bottom line and know how to manage both risk and reward.
Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa PBS series “Market to Market.” She can be reached at [email protected].
