March 9, 2021
Ken Eriksen, senior vice president at IHS Markit, shares insights about global grain supply and demand prior to planting season.
Global events over the past year have drawn down supplies of soybeans and corn. U.S. farmers have reported plans to take advantage of a positive outlook and stronger commodity prices by ensuring that every bit of farmland planted — estimated at 184 million acres — is as productive as possible.
There are many considerations for farmers this spring, including how quickly snow will melt and eligibility dates of crop insurance programs,
“Farmers will be looking at a number of factors, including what’s happening with strong export markets in South America, Europe and the Black Sea region as well as wheat markets,” says Ken Eriksen, senior vice president at IHS Markit. says. “There’s also been a run on commodity pricing in general and certainly on vegetable oils — specifically palm and soybean oils — which has been driving some of these markets. These prices will make input costs less of a burden, and U.S. farmers will have many opportunities coming into this planting season.”
China continues to be a key destination for U.S. soybean exports. “We’re going to have a record U.S. export program for corn, soybeans, wheat and all grains,” says Eriksen. “China has been rebounding from events such as African swine fever, which will improve their hog markets. We’re seeing soybean crush rates maintaining very well and a strong demand for corn, not only in China, but throughout Southeast Asia and South Asia.”
In the United States, markets are buying into carbon sequestration efforts and biofuels. “In the next couple of years, we think biofuels are going to be very important, not only for gasoline but for diesel and other markets,” says Eriksen. “We also see that palm and soybean oils, yellow greases and tallows will be important regarding pricing and how substitution effects will come into play and drive some of those markets.”
These trends will work to support prices because of nominal ending stocks of oil-crop soybeans, which are currently at about 106 million bushels, although USDA analysts are reporting larger inventories because they’ve penciled in more imports. However, those higher levels haven’t been seen yet, which could trigger demand to slow at soybean crush plants, says Eriksen. How South America strengthens its export program will be a strong signal for planting in the U.S. this year and next. “We believe soybean prices will stay elevated moving forward.”
Join Ken Eriksen and a roundtable of CHS industry experts on March 18 for “Around the Table Live: The Final Look Before Spring Planting.” Topics will include U.S. trade policy; corn, soybean and wheat dynamics; and trends in global soybean supply and demand. Learn more and register here.