Analysis: Big crops US, Brazil, slow demand in China allays fears of crop shortage – Community News
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Analysis: Big crops US, Brazil, slow demand in China allays fears of crop shortage

CHICAGO/NEW YORK, Nov. 8 (Reuters) – Big crops in the US, near-perfect weather for planting in Brazil and signs of dwindling purchases by top buyer China are bolstering supplies of two of the world’s most traded commodities: soy and corn.

Rising inventories indicate that prices for those key crops, as well as other commodities like sugar and coffee, may have peaked after the surge triggered by the start of the pandemic, farmers, brokers and analysts said.

Lower crop prices would be good news for consumers as global food prices soar to a 10-year high, the United Nations food agency said. read more

Declining inventories and strong global demand for crops over the past 18 months fueled food inflation and fueled fears of shortages.

Cheaper soy and corn would lower the cost of feeding livestock used to produce meat, which was out of reach for many people during the COVID-19 pandemic. But falling prices could jeopardize farmers’ profits, especially after seed and fertilizer companies increased prices for crop inputs.

Since the May high of nearly a decade, the Chicago Board of Trade’s soybean futures are down 27%, while corn futures are down 24% as near-perfect growing conditions led to bountiful harvests across broad parts of the United States.

But with the northwestern United States and Canada still reeling from a historic drought and dry weather that may continue there due to the climate phenomenon of La Niña, oat, wheat and canola prices will remain high, meaning that food inflation is far from over. Wheat futures recently soared to a nine-year high.

The soybean market is under the most pressure, as rising inventories and concerns about a slowdown in Chinese demand push prices down.

After completing the 2021 harvest of what he called an above-average soy crop on the 3,600-acre farm he operates in Woodhull, Illinois, Drew DeSutter booked a number of sales of soybeans that he will supply to grain traders in 2022 just in case. the market drops by the time that crop that he hasn’t even planted yet is ripe.

“I don’t think it’s a bad idea for farmers to set prices for next year’s crop,” DeSutter said.

The United States Department of Agriculture (USDA) has raised its outlook for global soybean supplies every month since it released its first forecasts for the current marketing season in May. If the current forecast of 104.57 million tons is met, it would be the second largest record for soybeans in the world.

China, the world’s largest buyer of soybeans, has slowed its purchases in recent months due to poor margins crushing soybeans into flour and oil to feed livestock. Analysts say shipments to China may fall below 100 million tons in 2021 due to a collapse in pig sector profitability and a surge in the use of wheat for animal feed. read more

Even vegetable oil prices, including palm oil, which have risen in part due to a labor shortage in Malaysia, are starting to weaken, with palm oil posting losses in three of the last four weeks. But biodiesel for soy and canola oil is in high demand as companies switch to greener fuels. read more

While bad weather has cast doubt on the state of China’s corn crop, the USDA and private analysts expect China to import less grain than last year. According to USDA data, global corn supplies increased 4.1% in the 2021/22 crop year.

China is expected to import 20 million tons of corn in 2021/22, up from 29 million tons in 2020/21, an analyst at a Chinese government agency said in late September.

“Given the current balance between supply and demand, I think the higher prices are behind us,” said Camilo Motter, a grain trader in Brazil, the largest global producer of soybeans, sugar and coffee.

IDEAL PLANT WEATHER

Argentina, which is expected to be the third largest supplier of corn and the fourth largest supplier of soy this year, is expected to produce a record crop of corn and a larger soybean crop than last year, according to the Buenos Aires Grains Exchange.

After a rough growing season, Brazil has had ideal weather to plant its next crop: long dry days for field work, followed by abundant rainfall that helped crops through the early stages of development.

Brazil’s coffee region saw the largest amount of rain for October since 1983, after farmers faced the worst drought in nearly a century in 2021. the ample moisture could give next year’s harvest a significant boost.

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

“The profuse rains of the past 20 days gave farmers breath,” Montesanto Tavares Group said.

Benchmark sugar prices on the ICE exchange peaked at 4 1/2 years on Oct. 11 amid signs of renewed demand from China as Brazilian production data confirmed a bleak harvest at the world’s largest grower after a severe drought .

But the long-term outlook for supplies has appeared to improve since, analysts say, due to the weather in Brazil and good prospects for the upcoming harvest in India and Thailand, the other two major global players. Market speculators have begun to cut their long sugar positions, an indication that their longstanding bets on rising prices may be coming to an end.

“Since market reach and upside potential are considered limited, speculators have probably decided to take their profits and put their money elsewhere,” said a European sugar trader.

WHEAT, CANOLA STAY TIGHT

In the northern plains of the US, farmer Doyle Lentz managed to weather this year’s drought with a surprisingly large soybean crop, but struggled with shortfalls in canola and spring wheat production due to the dry soil. He has booked some soybean sales for next year, but has withdrawn from canola and wheat contracts due to uncertainties about the prices of fertilizers and other inputs.

Lentz said he wouldn’t be able to make a profit on canola at current prices and would need a further rally before allocating any hectares to that crop.

“We’re going to have to spend a lot more time with the calculators, and when we get to a point where we can make a profit, we’re going to have to capture that,” said Lentz, who owns a 6,000-acre farm in Rolla, North America. Dakota.

In the Canadian Prairies, the severe drought that has reduced grain and canola production is likely to continue through 2022, said Colin Laroque, a professor of soil science at the University of Saskatchewan.

La Niña’s weather phenomenon usually means cold, dry weather for the Prairies, at least through February, he said. It would take a torrent of rain in the spring to counter the drought and restore soil moisture, but a week on that scale would make it difficult to plant crops, he added.

“Generally speaking, perennial drought means a perennial recharge,” Laroque said. “A quick solution is never a good solution.”

Reporting by Mark Weinraub in Chicago and Marcelo Teixeira in New York Additional reporting by Naveen Thukral in Singapore, Hallie Gu in Beijing, Ana Mano in Sao Paulo, Rod Nickel in Winnipeg and Maximilian Heath in Buenos Aires Editing by Caroline Stauffer and Matthew Lewis

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