Global grain demand continues to match supply

The grain and oilseed market outlook for 2024-25 boils down to one simple factor.

“It’s really a case of big supplies versus big demand,” said Rhett Montgomery, DTN’s lead analyst.

“It’s really going to be an arm wrestle to see what side of that equation wins out.”

Corn traded in the range of US$3.30 to $4.30 per bushel from 2014-20.

He thinks the new range is $4.10 to $5.25 per bu., which is the old range adjusted for inflation.

Corn prices tested the lower level of that range in late summer but have since bounced back.

Farmers in the United States have harvested three of the largest corn crops in history the last five years, and that is resulting in a surplus of the crop.

Fortunately, demand has been keeping pace with supply, keeping ending stocks under two billion bushels.

Current sales commitments are running well ahead of the U.S. Department of Agriculture’s anticipated export estimate.

The USDA is stubbornly refusing to increase its export number.

“They like to see sales turn into shipments,” Montgomery said during a presentation at DTN’s 2024 Ag Summit last month.

U.S. corn exports to China are down 86 per cent from the peak in 2021.

Mexico has softened that blow, with demand ramping up due to drought issues in that country. The country accounted for 41 per cent of U.S. corn commitments as of Dec. 6.

However, Mexico is facing the possibility of 25 per cent import tariffs from the U.S. once president-elect Donald Trump takes office Jan. 20.

Mexico could retaliate with import tariffs of its own on corn and other commodities, which could significantly hurt U.S. exports.

Demand from the ethanol sector has been stronger than anticipated. He is forecasting 5.53 billion bu. for the year versus the USDA’s 5.45 billion bu. number.

Montgomery said his upside target for corn prices is $4.70 if U.S. ending stocks shrink.

“That’s about as bullish as I’m willing to get right now just given where production and supplies are at,” he said.

There would have to be a significant weather event in South America to push prices to the $5.25 ceiling of his anticipated price range.

The USDA is forecasting five billion bushels of Brazilian corn and two billion bushels from Argentina.

If those crops get bigger, the downside risk is $4 per bu. He thinks the market has a “psychological barrier” to dropping below that level.

U.S. farmers harvested a bin-busting 4.46 billion bu. of soybeans, and there is a lot more coming from South America.

“We’re likely looking at a record crop in Brazil and a very good crop in Argentina,” he said.

Those three countries account for 80 per cent of world production (excluding China).

The U.S. needs to export as much as it can before Brazilian beans hit the market and has done a good job on that front, with sales commitments running well above last year’s dismal pace.

Soybean crush margins have been trending down but are still very attractive. A record 216 million bu. of soybeans were crushed in October.

Soybean oil exports have “skyrocketed,” leaving stocks at historically low levels.

Soybean futures prices are 80 per cent lower than the highs set in 2021-22.

Montgomery believes the ceiling for 2024-25 nearby futures will be $11 per bu., but his more realistic estimate is in the low-$10 range.

He doubts soybean futures will dip below $8 per bu. and that they are probably nearing the floor today.

The U.S. winter wheat crop had the worst ratings going back to 1986 in late October.

However, there has been a vast improvement due to much needed rainfall in the Southern Plains. The crop is now in good shape heading into dormancy.

U.S. wheat exports are forecast to rebound from a 50-plus year low last year. The USDA expects a 20 per cent increase.

Russia has been the “big dog” in the wheat market for the last several years. However, the Russian government will be restricting exports to 11 million tonnes from February to June.

Montgomery said it will be very interesting to see who steps in to fill the void when Russia taps the brakes. He thinks it will be the European Union and Australia, but the U.S. could get some business as well.

He did not provide a price forecast for wheat.

Montgomery urged growers to consider put and call options as well as seasonal averaging products for all crops this year.

“It takes a lot of risk off the table while also taking some stress off of your mind not having to tune into the market every day and stress over every penny up or penny down,” he said.

Tags: Russia, Market, China, demand, exports, Mexico, corn, grain, prices, Oilseed, United States, soybeans, Outlook, wheat