KANSAS CITY, MISSOURI, US — There has been no shortage of analysts’ outlooks and government data in June that has painted a picture of strong 2024 US wheat, corn and soybean production along with limited upward price potential that bodes well for ingredient buyers. Of course, summer weather will be the key determining factor as to whether those outlooks ultimately come to fruition.

In general, analysts and traders are expecting the most “normal” year for commodities and ingredients since the COVID pandemic disruption that started early in 2020. Prices of most ingredients (barring cocoa, eggs, coffee and orange juice) have declined from highs posted the past couple years, and supplies appear to be adequate if not ample in some cases. Supporting those forecasts have been higher crop condition ratings than a year ago for winter wheat, corn and soybeans in the US Department of Agriculture’s weekly Crop Progress reports.

Speakers at the Sosland Publishing Purchasing Seminar held June 2-4 in Kansas City provided detailed analysis of wheat, corn and soybean markets as well as sugar, edible oils and other key ingredients used by food manufacturers. The “tone” at the Purchasing Seminar, which had record-high attendance of 860, seemed lighter than in recent years, if not even upbeat.

The USDA on June 12 released its Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports. The Crop Production report indicated slightly higher US winter wheat production from the May forecast, while the WASDE report provided little if any new insight into the corn and soybean markets. One more key data component — the USDA’s June 28 Acreage report — will help solidify analysts’ forecasts, especially for corn, soybeans and spring wheat. Initial survey-based durum and other spring wheat production forecasts will be issued by the USDA in July, while forecasts for corn, soybeans and most other grains will come from the Department in August.  

 Wheat crop ratings high

The US spring wheat crop was seeded at a rapid clip despite occasional rain delays appreciated for building beneficial soil moisture levels. The crop in the six US production states was 95% emerged by June 16, slightly ahead of the 2019-23 average of 93%, and was 4% headed by the same date, slightly behind the average pace of 7%, the USDA said in its June 17 Crop Progress report. The developing spring wheat crop was rated in 76% good-to-excellent condition by June 16, the USDA said, having improved from 74% in the first aggregate ratings two weeks earlier.

“Right now, spring wheat’s off to a good start in both the United States and in Canada, which grows more so it’s just as important to the spring wheat supply,” said Bill Lapp, founder and chief economist with Advanced Economic Solutions, Omaha, Nebraska, US. “No. 1, was it planted in a timely fashion to avoid worry about frost? Yes. No. 2, is there any major precipitation problem shortfall up there? There isn’t this year. Precipitation was copious, but isn’t adversely impacting them, a positive situation for North America. Spring wheat futures moves have largely been fund-driven and probably should be viewed as an opportunity for end users.”

Meanwhile, winter wheat harvest is moving north from the southeastern US and from the southern Plains at an above average pace. Winter wheat in the 18 major production states was 27% combined by June 16, well ahead of 13% a year earlier and 14% as the 2019-23 average for the date, the USDA said. The USDA on June 12 estimated the US soft red winter wheat crop at 342 million bus, down less than 1% from the May forecast and down 24% from 2023 based on a lower yields and lower acreage. Grain market panelists at the Sosland Publishing Purchasing Seminar, including Lapp, suggested there is room for soft red production to expand.

“It’s not huge, but there is an upside to that, perhaps 10 million or 20 million bushels pending no adverse rain events,” Lapp said. “We’re far enough along that heat isn’t going to reduce the crop. There’s the potential for more production somewhere between being in balance and being a surplus if China doesn’t come in for more US wheat.”

The USDA in late March rated the winter wheat crop 56% in good-to-excellent condition in its first aggregate ratings of 2024, compared with 50% good-to-excellent in the last weekly report of 2023 on Nov. 23 and compared with a decade-plus low rating of 28% a year earlier. Drought issues in the US southern Plains eroded the rating over the late spring and summer when Mother Nature issued little moisture during key development periods. Still, US winter wheat was 49% in good-to-excellent condition as of June 16 compared with 38% a year earlier.

Despite issues stemming from a lack of precipitation in key states, the Plains moisture situation was far better than the past two drought-reduced crops and the class was poised for a production comeback.

“We’re seeing that happen now as a big part of what has transpired in terms of the prices going down so sharply from Monday, June 10,” Lapp said. “It’s been a break away to the downside, but better prospects from the hard wheat crop have helped. Maybe we’re getting tired of talking about the Russian smaller crop story, which hasn’t translated into the US being competitive in export markets yet. There’s some optimism about the corn crop, though there’s a lot of mattering nabobs out there about problems here and problems there. When we have a wet spring, you factor it into the market once you get it planted, it starts growing, all that precipitation becomes a negative for prices as you get a greater probability of trend deals. But maybe above all of that, this crop (hard red winter wheat) looks like 750 million bus is potentially in the cards.”

Wheat market watchers have several factors to stay cognizant of in the global marketplace. The EU and French crops were battered in recent weeks by rainfall, which was expected to cut into yields and production. The crop in Russia, which has flooded global markets with inexpensive wheat in the past year, is the subject of much discussion after a late frost compelled the agriculture ministry to declare an emergency in several cropping districts. Drought issues exacerbated ideas of reduced production. As a result, the USDA in the June 12 WASDE report raised its forecast for US wheat exports 25 million bushels, to 800 million.

“Last year, the US lost some Mexican demand likely to come back this year so that makes a higher number probable, but USDA’s 800 million (exports) may be a tall order,” Lapp said. “Ukraine’s crop is getting bigger but that’s going to have to offset smaller Russian and smaller French crops. Neither boosted US export demand, but that could turn, perhaps late 2024 or early 2025, that suddenly Russia curtails exports and that becomes a bullish story or at least a price-supportive story. The burden of the market may be to prove that we can justify these prices with the supply we have.”

A feature in wheat complex futures through most of the previous marketing year was large short positions held by funds, which reached record-short levels at times. In mid-April, funds began to reduce their short position and drove Kansas City futures more than $1.70 a bushel higher.

“Funds have been really pushing the market around, and they’ve got a disproportionate influence on what happens in those markets versus 10 years ago where you would see it move like we saw based on changes in the crop conditions that were tangible or changes in export demand that might be tangible, or a USDA report, and now it seems like it’s more of a changing of the collective mindset of the funds,” Lapp said.

A so-far smooth planting and development season for US row crops is one to watch, Lapp said.

“There’s enough of a spread between the wheat and corn markets now that it’s certainly not one for one, but if corn moves 3¢ one way or the other, it might be a penny move in in the wheat markets,” he said. “But it’s going to have some correlation there.”

Finally, macroeconomic issues, as always, will play a role, especially whether inflation recedes to levels where the US Federal Reserve feels comfortable lowering interest rates, which could weaken the US dollar and perhaps boost commodity prices.

“We’re seeing inflation come down toward the 2% target and there’s some other metrics that would also say inflation’s lower than 3% on a year-over-year basis if you don’t include shelter,” Lapp said. “That’s a different way to look at it, one that most of the other industrialized countries look at it that way. And ours, a third of our CPI is shelter, which is up 5½% to 6%. I still think there’s one rate cut and potentially two cuts this year, depending on if we start seeing any slowing in jobs. Secondarily, what will the inflation data show us? I don’t think the economy’s going in recession or we’re in any great peril.”

 Soybean supplies ample

The 2024 US soybean crop was off to a strong start with planting and emergence as of June 16 behind the year-ago paces but ahead of the 2019-23 average for the date. The USDA rated the crop in the 18 largest soybean producing states at 70% good-to-excellent as of June 16, down from 72% a week earlier but well above 54% at the same time last year. The decline in the crop condition rating was in part due to unseasonably high temperatures in mid to late June. However, it’s too early to call the weather impact on the crop with the most critical weather period for soybeans not until August for pollination and later for pod setting and filling.

Topsoil moisture levels as of June 16 were 70% or above adequate to surplus in most major soybean states except for Ohio at 53%, according to the USDA. Minnesota was dealing with excess topsoil moisture at 99% adequate to surplus. Subsoil moisture levels, critical during the growing season, also were 70% or above in the major states, including Ohio.

The USDA’s analysis of the June 11 US Drought Monitor showed just 1% of soybeans in an area of drought versus 51% at the same time last year, with the entire Midwest free of drought except for 17% in Kansas and 4% in Nebraska.

The USDA in its June WASDE report lowered from May its forecast of 2023-24 soybean crush by 10 million bushels, which resulted in a 10-million-bushel increase in carryover (ending stocks) for both this year and 2025 as no other changes were made. The USDA’s US soybean carryover as well as world ending stocks forecasts all were slightly above the average of analysts’ pre-report trade estimates for both this year and next year.  

“The only change for the US soybean S&D was a 10-million-bushel cut to crush for this season,” said Brian Harris, executive director and co-owner of Global Risk Management, Tampa, Florida, US.

The lower soybean crush forecast recognized the slowing crush pace in April as reflected in National Oilseed Processors Association (NOPA) and USDA data, he said.

“This carried through to higher new crop stocks, which remain very healthy,” he said. “For South American soybeans, the Brazil crop was lowered 1 million tonnes (from May); Argentina was unchanged. For the soy products, the lower crush/oil production was offset by lower food use, keeping stocks nearly unchanged (down a mere 15 million pounds from May). Similar demand changes were seen in new crop.”

Soybean crush rebounded in May from the low number in April, with NOPA reporting May crush at 183,625,000 bushels, up 8% from April, up 3% from May 2023 and well above the average trade expectation of 178,352,000 bushels. It was the highest crush ever for the month of May. The soybean crush has set monthly record highs every month so far in the 2023-24 marketing year, with April the exception. May 31 soybean oil stocks were 1,724 million pounds, down 6% from April and reflecting a normal seasonal trend of higher summer use and lower production due to plant maintenance and tightening supplies. Production typically increases when new crop soybeans become available in October.  

Harris noted that USDA June forecasts of soybean oil exports for both old and new crop were increased from May, “reflecting the more competitive US soy oil export price against firmer South American premiums of late.” The USDA in its June WASDE forecast 2023-24 soy oil exports at 450 million pounds and 2024-25 exports at 600 million pounds, both up 100 million pounds from the May forecasts. US soy oil exports could go even higher, Harris said, with season-to-date exports running 39% ahead of a year earlier.

Harris expects the June Acreage report to show an increase of 500,000 to 750,000 acres in soybean plantings compared to the USDA March Prospective Plantings report. He said more farmers opted to plant soybeans rather than take prevent-plant insurance payments in some northern areas where corn planting was delayed by wet weather this spring.

Arlan Suderman, chief commodities economist at StoneX, also expects higher soybean acreage but in the 200,000-to-300,000-acre range due mainly to increased double cropping in states where soybeans are planted after the winter wheat harvest, mostly in the soft red winter states of the eastern Midwest.

 More corn planted acres expected

Like soybeans, the 2024 corn crop has had a strong early start. The crop was rated 72% good-to-excellent as of June 16, down from 74% the previous week but well above 55% at the same time last year, per the USDA’s latest Crop Progress report.

Since the major corn and soybean states tend to overlap, soil moisture and drought conditions were similar for both crops. The USDA said 2% of corn was in areas of drought as of June 11 compared with 57% a year earlier, with Kansas at 32%, Nebraska and Colorado both at 3% and Texas at 10%.

The USDA made no changes from May for corn in its June WASDE report. The USDA June WASDE forecasts for US corn carryover and world ending stocks all were slightly above the average of trade expectations for both 2023-24 and 2024-25. Analysts were left waiting for the June Acreage report and summer weather for additional input.

“The USDA did not change any supply or demand estimates for either old or new crop, a truly unchanged balance sheet,” Harris said concerning the June WASDE report. “The lean by the trade was for a higher old crop (2023-24) demand base, mainly ethanol and export, but we didn’t get it. US corn export sales have been strong, but the USDA did not touch their Brazil and Argentina forecasts, which would have been the catalyst to increase US exports. The USDA remains solidly above private forecasters on their 2023-24 Brazil and Argentina corn production forecasts. As a result, US corn stocks were above expectations and remain healthy above 2 billion bushels. (It’s) all about the weather in the next 60 days for the corn market.”

The key summer period for the corn crop is the yield-determining pollination phase that occurs during July in the major producing areas of the Corn Belt. It generally coincides with one of the hottest times of the summer, which adds risk to the market.

Suderman noted that a high-pressure ridge typically sets up “somewhere in the country” during the summer, and where it sets up will be key to weather as the growing season advances. If it sets up to the southwest of the Midwest, which is the favored forecast, it typically means warm conditions but with better moisture, which tends to result in above-trend yields. If the ridge sets up over the Midwest, which is the less likely forecast, conditions tend to be more stressful for crops and yields may decline.

Suderman expects the June 28 Acreage report to show an increase of about 1 million acres for corn because the USDA “was a little low” in its March projection of 90 million acres based on farmer planting intentions.  

“There’s no reason to ration corn or soybeans with higher prices,” Suderman said. “We don’t have a shortage of corn and soybeans, but we’re not immune to a weather problem.”

If yields for either crop drop 5% from current trend yields, then rationing may develop.

“The market isn’t going to trade acreage,” Suderman said. “The focus is on weather and yields.”