The United States has harvested its second-largest corn and soybean crops on record this fall, leading to improved storage margins for grain elevators and increased market activity. According to a new report from CoBank's Knowledge Exchange, this bumper harvest has driven prices to four-year lows, stimulating robust demand both domestically and internationally.
Key points from the report include:
Strong domestic demand: Accelerated U.S. biofuel production and high livestock feed usage have bolstered internal consumption.
Robust exports: A vigorous export program has helped manage the abundant U.S. corn and soybean inventories.
Potential challenges: The strengthening U.S. dollar could increase costs for foreign buyers, while potential trade disputes with key partners like China and Mexico may slow exports.
Policy uncertainties: Questions surround biofuel policy under the new administration, potentially affecting demand for corn-based ethanol and soybeans used in biodiesel and renewable diesel.
Tanner Ehmke, lead grain and oilseed economist with CoBank, noted, "For grain elevators, all these factors improve the profit outlook for storage via weakening buy basis in the cash market and a widening of futures spreads for both corn and soybeans."
The report also highlights potential risks to the export market outlook, including ample U.S. supplies, record crops from South America, and the possibility of retaliatory tariffs. These factors could necessitate rerouting U.S. corn and soybean exports, potentially slowing the overall export pace and increasing shipping costs to smaller markets.
While domestic demand for soybeans remains strong, with expanding crush capacity to meet rising renewable diesel demand, the growth in this market is maturing as profit margins decline. The weakening margin outlook for biofuels and policy concerns under the new administration may slow ethanol demand for corn and crush demand for soybeans.
Ehmke concluded, "The combination of growing global supplies of corn and soybeans, slowing exports and some reduction in domestic demand will incentivize storage, with grain elevators benefiting from bigger carries in the futures market and cheaper basis in the months ahead."
