Prices of key agricultural products traded on the Chicago Mercantile Exchange (CBOT) increased slightly in the trading session on August 11 as the market focused on waiting for the latest report on global agricultural supply - demand from the US Department of Agriculture (USDA).

Agricultural prices slightly increase

Corn price movements for December 2021 delivery on the CBOT in the past 6 months (Graphic: Barchart.com)

At the close of trading on August 11 (local time), corn prices for December 2021 delivery on the Chicago Mercantile Exchange (CBOT) increased slightly by 6 cents to 5.59 USD/bushel (25.4 kg/bushel of corn).

Soybean prices for November 2021 delivery also increased by 3.25 cents to $13.40/bushel (27.2 kg/bushel of soybeans) and wheat prices for September 2021 delivery remained unchanged at $7.27/bushel (27.2 kg/bushel of wheat).

Currently, the market is focusing on waiting for the World Agricultural Supply and Demand Estimates (WASDE) report for August 2021 released by the US Department of Agriculture (USDA) on August 12 (local time) to better assess the supply and demand situation of major agricultural products globally.

On the supply side, the latest report by the National Supply Agency of Brazil (CONAB) released on August 10 (local time) said that the country's corn output in the 2020/2021 crop year is expected to reach only 86.7 million tons, down 16% compared to the previous crop year. Of which, Brazil's Safrinha corn crop (second corn crop) output is estimated at only 60.3 million tons, down 20% compared to the previous crop year due to the impact of extreme weather patterns.

This has caused a shortage of domestic corn supply in Brazil, corn prices have skyrocketed and forced the country to increase corn imports from other countries at a level 4 times higher than usual. At the same time, Brazil's corn exports are forecast to decrease in the coming time.

In the United States, the current corn crop is entering an important pollination stage, which greatly determines the corn output of the 2021/2022 crop year. However, hot and dry weather is still affecting the Corn Belt - where the largest corn and soybean growing areas in the United States are concentrated. This has caused the market to worry that the supply of corn and soybeans in the United States will decrease, pushing up the prices of these commodities in the short term.

China's soybean inventories are on the rise; meanwhile, biofuel production in the United States is falling (Graphic: Saigon Futures Corporation)

On the demand side, Saigon Futures Corporation believes that the demand for soybeans in Brazil is gradually increasing after the government decided to increase the biofuel blending ratio in gasoline from 10% to 12% in September - October 2021 and to 13% in November - December 2021. The biofuel blending ratio in gasoline in Brazil could reach 15% by the end of 2022.

However, the demand for soybeans for oil pressing in the United States has been on a downward trend since the beginning of this year. Biofuel production in the United States has also been continuously decreasing recently despite the summer being the peak season for fuel consumption when travel activities skyrocket. At the same time, demand for soybeans for animal feed production in China has also weakened.

Corn and soybean price developments in the coming time

The latest survey by Reuters (UK) shows that analysts forecast that the US soybean and corn yield in the 2021/2022 crop year will average 50.4 bushels/acre and 177.6 bushels/acre, respectively. These figures are both lower than the estimates given by the USDA in the WASDE report last July.

Major market research firms in the world also believe that the US corn and soybean yields in the upcoming August WASDE report will be lower than the estimates made in July.

Corn and soybean price developments in the US when corn and soybean inventory data are released (Graphic: Saigon Futures Joint Stock Company)

Synthesized data from Saigon Futures Joint Stock Company shows that in the past 10 years, corn prices in the US have mostly reacted in the opposite direction to corn inventory data in the WASDE report; only in 3 years did the price move in the same direction as the inventory data. Soybean prices have also moved in a similar direction.

A Reuters survey shows that soybean inventories in the US at the end of the 2021/2022 crop year are expected to reach 159 million bushels, 4 million bushels higher than the estimate in July. The country's corn stocks at the end of the 2021/22 marketing year are forecast at 1.297 billion bushels, lower than the 1.432 billion bushels estimated in last month's WASDE report.