The Mississippi and Ohio rivers fell to historic lows following drought that also affected corn and soybean crop yields across the Midwest. Although some grain shipments continue to move, they move in trailers, or groups of smaller barges, with lighter loads. Barge rates skyrocketed and millions of tons of grain cargo were diverted.
However, strong domestic demand for soybeans from soybean crushers, combined with reduced yields in the United States and some continued Chinese export demand for corn, kept corn and soybean prices relatively high until recently. ‘now with corn prices in the high $6 per bushel range and soybeans priced in the high $13 per bushel range.
Naomi Blohm, senior market advisor for Total Farm Marketing, told the High Plains Journal that despite logistical issues, “export sales of soybeans are above the 5-year average, while export inspections (this who actually leaves the country) – average annual rate – via rail shipments from the Pacific Northwest. Already in June, grain exports from the Great Lakes had increased by 37% compared to last year.
“However, export maize sales and inspections are slightly below the 5-year average due to lack of water. The low level of the river affects local base cash levels. So yes, some silos are not accepting grain right now, or if they are, the base could be wider than normal,” Blohm said. But she adds, “At this time, I don’t think this will affect Chicago corn futures prices, because the underlying fact is that the 1.1 billion bushel carry in the United States is tight. “
“For the past two years, the commodities industry has been told that Chinese demand for commodities will slow down because the country is on lockdown due to strict COVID-related restrictions,” Blohm said. “But in fact, Chinese demand for corn has increased over the past three years. China grows a quarter of all corn in the world. The Chinese use it entirely and export nothing. In the past three years, their overall domestic demand has exceeded what they produce domestically, and that is why they have started importing corn. »
Blohm said the increase in corn exports from Brazil more than compensated for what was lost by Ukraine. “If you look closely at the numbers, the increase in export business that Brazil has acquired over the past two years helps offset Ukraine’s loss of export capacity. So it’s not like there’s more maize to export on the global front for 2022-23. It is only now that Brazil has become a bigger competitor as Ukraine has become less of a competitor.
Agriculture and marketing consultant Scott Sigman said, “Regardless of the policy between the United States and China, pigs and poultry must always be fed. And China continues to expand its pig herd. Yields in the United States, although down slightly due to the drought, are still satisfactory and growers are getting good prices. »
Blohm said figures from global agricultural supply and demand estimates for the past few years show Brazil was the fourth-largest corn exporter in 2020-21, after the United States, Argentina and India. Ukraine. It has since moved up the list to second place, but that increase has been offset by Ukraine’s decline. She said corn yield declines have already been priced into the market.
“The reduction in US exports has been priced into the market since May. Due to higher prices, a higher US dollar, the USDA has done a good job of showing that the demand for corn has been reduced. The fact that Brazil has the potential to export larger quantities of maize due not only to a larger harvest, but also to a recent deal to sell maize to China, is also already reflected on the market.
Blohm points out that Mexico has bought more American corn than China this year. followed by China, Japan and Canada, with Colombia, South Korea, the European Union, Taiwan, Honduras and Guatemala completing the top 10 importing countries. “We have regular customers, but due to higher prices and a higher US dollar, customers are buying overnight.”
“The corn price is reasonable,” Blohm concluded. “Quite frankly, I’m not sure how much further demand destruction might occur for corn; it would take a black swan event.
However, data from China’s General Administration of Customs released on Oct. 24 showed that China’s September corn imports were down 56.6 percent year-on-year from the previous September. September volume totaled 1.53 million metric tonnes, down 15% from the 1.8 million tonnes recorded in August. Total maize imports in the first nine months of 2022 reached 18.46 million tonnes, down 25.9% from the same period last year.
Sigman noted record barge shipping prices, but said the inherent flexibility of the U.S. multimodal shipping system has helped — along with increased capacity at some soybean processing facilities in the Dakotas, Nebraska and Minnesota – which he said was largely driven by forecasting. demand for biodiesel and renewable diesel in California due to its emission and truck regulations.
Guy Allen, senior economist for the International Grains Program at Kansas State University, credits domestic demand for keeping soybean prices high. “Strong Midwest grind margins above $3 are providing good price support. Without [those crush margins] soybeans would be far from $14 (a bushel). While export values are historically strong, freight and transportation uncertainty is limiting export movement for all grains.
Allen said, “The Nov. 22 CBOT soybean delivery value was not working in the export market, with prices supported by strong demand from domestic crushers, which are currently providing good support for crop prices. Similar dynamics can be seen in maize and sorghum markets, as they are currently supported by domestic demand.”
So even though the scarcity of freight availability, both barge and rail, makes logistics “very challenging for the country to raise this crop for all grains,” Allen said, “as markets export rates remain ‘flat’ to ‘inverted’, domestic cash and CBOT futures values are showing an increasing carry structure.”
He added: “This change is welcomed by the field elevator which has struggled in recent months to capture a return to warehouse space. This situation will only improve when transportation becomes more readily available, that is, when we receive enough precipitation that will put enough water in the river system and it will become commercially navigable again. The current situation is likely to persist for some time and is not expected to rectify until we receive seasonal precipitation this spring. »