Surges in grain and oilseed prices in recent weeks have caught many in grain-based foods off guard. August is an important month for row crops and spring wheat each year, but weather markets typically take form in June and July and often wind down in August as confidence in crop prospects increase. Not so this year. Good crop conditions prevailed through much of the season, but losses were expected to be severe both from the derecho storm in mid-August that caused widespread damage in Iowa and from a late-summer drought that has diminished row crop prospects.
Further fueling bullishness, China has been a heavy buyer of US grains and soybeans after importing little the first seven months of the year. In addition to perhaps as much as 20 million tonnes of soybeans, China has bought about 7 million tonnes of corn and 1.5 million tonnes of wheat. The corn purchases, in particular, were far heavier than expected. Just days into the start of the new crop year, the corn purchases already exceed what the US Department of Agriculture in August projected China would import for all of 2020-21 from all sources.
Markets have reacted to the changing supply/demand prospects, and soybean prices have reached two-year highs. Wheat futures have climbed about 50¢ per bu from early August, and corn prices reached the highest levels since March. Well-covered ingredient buyers appear likely to face a more challenging purchasing environment this fall and winter.