Harvests in the US and Brazil and slowing Chinese demand alleviate fear of grain shortages

Big crops in the United States, near-perfect planting weather in Brazil and signs of a slowdown in purchases from China are bolstering the supply of two of the world’s best-selling products: soybeans and corn.

Growing stocks indicate that prices for crops, as well as other staples such as sugar and coffee, may have peaked following the surge caused by the pandemic, farmers, brokers and analysts said.

Lower prices would be good news for consumers after food soared to a decade high, according to the United Nations food agency.

Lower supply and strong global demand for crops in the past 18 months boosted food prices and sparked fears of shortages.

A decline in soybeans and corn would reduce the cost of feeding livestock for meat production, the prices of which have been out of reach for many during the COVID-19 pandemic. But the fall could threaten farmers’ profits, as seed and fertilizer companies have raised the value of inputs.

Since hitting decade highs in May, Chicago Stock Exchange soybean futures are down 27%, while corn futures are down 24%, as near-perfect growing conditions across broad swaths of states United anticipated a bountiful harvest.

However, as the northwestern United States and Canada continue to experience a historic drought, which could continue due to the La Niña weather phenomenon, the prices of oats, wheat and rapeseed remain high, which means that inflation of food is far from over. Wheat futures recently hit a nine-year high.

The soybean market is the one that is under the most pressure, as increased supply and concerns about the cooling of Chinese demand are driving prices down.

After finishing a large 2021 crop at the 3,600-acre farm in Woodhull, Illinois, Drew DeSutter booked some soybean sales that he will deliver to grain traders in 2022, in case the market dips, even though it hasn’t even stopped. planted.

“I don’t think it’s a bad idea for farmers to set some prices for next year’s cropDeSutter said.

The United States Department of Agriculture (USDA) has raised its forecast for world soybean supply every month since May for the current season. If the current forecast of 104.57 million tons is met, they would be the second largest stocks on record.

China, the world’s main buyer of soybeans, has slowed down activity in recent months due to low margins for soybean milling for the flour and oil used to feed livestock. Analysts say that shipments to China in 2021 could be less than 100 million tons due to the lower profitability of the pig sector and the strong increase in the use of wheat for feed.

Even the prices of vegetable oils, including palm oil, which rose in part because of a labor shortage in Malaysia, have started to show weakness. Palm oil is down in three of the last four weeks, but soybeans and canola oil have been in high demand for biodiesel as companies transition to a greener fuel.

While bad weather has cast doubt on the status of China’s corn crop, the USDA and private analysts expect China to import less grain than last year. According to USDA data, the world supply of corn will increase by 4.1% in the 2021-2022 season.

China would import 20 million tons of corn in the 2021-2022 season, down from 29 million tons in 2020-2021, an analyst from a Chinese government institute said in late September.

“Given the current balance of supply and demand, I think higher prices have been left behind”Said Camilo Motter, a grain broker in Brazil, the world’s leading producer of soybeans, sugar and coffee.

Ideal climate

Argentina, the world’s third largest supplier of corn and fourth of soybeans this year, is expected to have a record corn harvest and a higher soybean harvest than last year, according to the Buenos Aires Cereal Exchange.

After a difficult season, Brazil has had an ideal climate for planting its next crop: long dry spells for work in the fields, followed by rains that helped crops in the early stages of development.

Brazil’s coffee belt fell the most rain for an October since 1983, after farmers experienced the worst drought in nearly a century in early 2021. Although frost and drought had already caused some damage to the plants, market players believe that the abundant humidity could give a big boost to next year’s harvest.

The Montesanto Tavares Group, a large coffee producer and processor in Brazil, expects a near-record harvest in 2022.

“The abundant rains of the last 20 days were a respite for farmers”, Stated the Montesanto Tavares Group.

Benchmark sugar prices on the ICE exchange hit a four-and-a-half-year high on October 11, on signs of new demand from China as a lousy harvest was confirmed in the world’s leading producer, Brazil, following a severe drought.

But long-term supply prospects appear to have improved since then, analysts say, due to weather in Brazil and good prospects for the next harvest in India and Thailand, the other two big global players. Market speculators have started to trim their long positions in sugar, indicating that their year-round bets on a price hike may be coming to an end.

“With the market in a range and with upside potential that is considered limited, speculators have probably decided to take profits and move their funds elsewhere.”Said a European sugar trader.