13 May 2021

The USDA’s first official balance sheets for the 2021/22 season shared a benign forecast which belies the tricky year ahead for grains and oilseeds. 2020/21 ending stocks of corn and soybeans are set to touch rationing levels, which is why we’ve seen prices move out of reach of some consumers. The USDA’s figures suggest all will be well; for US corn, wheat and soybeans, next year’s production will increase; demand will be flat or in decline (especially on exports, where rationing occurs first) and ending stocks as a whole will be more manageable than the current scarce environment. It’s a nice story – but ignores the deep weather issues in the US and Brazil and the potential acute periods of scarcity in the year ahead before global grain and oilseed stocks, particularly for world trade, are replenished to any reasonably degree.

By using reasonably optimistic prospects, USDA increases uncertainty… Indeed, any production risks that materialise would definitively take stock levels to unprecedented low levels. So, prices could reach unprecedented high levels. It is not guaranteed to happen, especially for grains, but the scenario is a strong possibility.

Oilseeds are set to remain tight amid very strong Chinese demand, now seen at a record level of 103Mt, for just the 2021/22 soya imports. Furthermore, global veg. oil stocks are expected to fall to 11-year lows. These fundamentals are nothing but supportive for oil rich seeds like OSR.

For grains the story also remains unchanged when compared to this season. Wheat S&D is set to remain well balanced again, if the record crop potential is realised. Corn will continue to be the market leader with stocks to remain at very low levels. All this even in the event of decent crops in the US, Brazil and Ukraine. However, we already foresee Brazilian production to be at least 10Mt lower than the USDA forecast (92Mt vs 102Mt currently).

Globally, the situation will remain very tight throughout 2021/22 and markets should be highly reactive to any further production risks that develop. Stocks simply cannot move much lower than they are now, without prices responding accordingly. Weather market and volatility should remain high, at least until July, providing further good selling opportunities.

More than ever, our markets are walking a tightrope… any element of risk will strongly disrupt the market balance. Potentially buoyant!

Sébastien Mallet