Grain markets drop after revised global yield forecasts

Grain and oilseed prices dropped sharply last week after crop reports suggested global yields for 2021-22 may be higher than previously thought.

Markets for grain and oilseed have been booming as high global demand and lower crop yield forecasts combined to push up prices.

The lower yield predictions were based on growing crops, which were thought to have been hit by dry and cold weather in key growing areas.

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In the past few weeks, the strong demand and relatively gloomy supply outlook had drawn large investment speculators into crop futures markets, creating competition for stocks.

This added further upward impetus to prices.

However, a report by the US Department of Agriculture (USDA) on crops in both North and South America, has revised predictions.

Potential yields outlined in the report were all in line with, or above, industry expectations, according to the AHDB.

The USDA now predicts big US maize and soyabean crops in 2021-22, after recent wet weather boosted growth.

Forecasts suggest the two crops could be the second and third highest on record, respectively, said AHDB senior analyst Helen Plant. 

USDA forecast for global world end stocks 2021-22

Crop Predicted yield (million tonnes) Change on previous estimate (million tonnes)
Maize 292.3 +9.2
Soyabeans 91.1 +3.0
 Wheat 295.0 +0.7
Source: USDA/Refinitiv

The news prompted speculative traders to sell off some of their long positions to book profits ahead of a fall, Ms Plant said. This contributed to a fall in prices, which in turn has likely triggered further selling, she said.

Wheat futures prices for December 2021 dropped through the week from US$280/t (£198/t) to US$259.20/t (£183.72/t), while maize fell from the US$250/t (£177.20/t) mark to US$219.80/t (£155.78/t).

Soyabean futures for November 2021 also slid back from US$530/t (£375.64/t) to US$513.07 (£363.63/t) at close of play on Friday 14 May. (All sterling prices are based on 17 May exchange rates.)

Planting pace

Grain traders Cofco International said that, as well as the rainfall, crop planting was ahead of the norm.

In contrast to the past two years, the lightning planting pace has continued, with corn at 67% completed against a 52% average.

Beans were at 42% through drilling, compared with a 22% average for this time of year. Spring wheat was at 70% of the area in contrast with a 51% average.

This fast-planting pace – along with higher prices this year – supports the idea corn and bean acres will expand, Cofco said.

Overall, though, there was nothing in the USDA data that should overtly change overall market sentiment. Markets are still all about weather with the main interest on Brazil and the US, a Cofco spokesman added.

Favourable forecast

The AHDB said it would continue to watch a number of factors that could influence prices in the coming weeks.

In the US, the record maize and near-record soyabean yields still require good weather through to harvest.

While the forecast looks more favourable to growth, it remains to be seen what conditions are like in July and August, when crops are in their reproductive and grain/pod fill stages.

Meanwhile the USDA’s forecast for Russian wheat could be subject to further revision. The USDA puts Russia’s wheat crop at 85m tonnes – above some industry forecasts and only slightly down on last year’s 85.4m tonnes, Ms Plant said. 

The figure excluded the large grain producing area in the Crimea.

But Russia’s statistical department, SovEcon, predicted an 81.7m tonne crop even with Crimea’s likely crop included.

For Brazilian maize, the challenge has been a long, dry period. Although this weather is forecast to continue, the USDA 2020-21 maize crop estimate is still relatively high and above some other industry predictions, the AHDB said.