Glacier FarmMedia COVID-19 & the Farm



The Good, Bad & Ugly

The Good, Bad & Ugly

The Good: The USDA report contained a bullish surprise in the vegetable oil markets as they continued to increase both domestic use and exports of vegetable oil in the 2021-22 crop year. Total vegetable oil use globally is expected to rise by 9.9 million tonnes in the 2021-22 crop year. Ending stocks are expected to drop by 1.9 million tonnes from last year to 22.347 million tonnes. This is the smallest ending stocks level since the 2010-11 crop year. This should help support vegetable oil prices during the upcoming crop year. Canola will be a major beneficiary of the strong vegetable oil prices due to the high oil content of the seed.

The Bad:  There was a debate about how USDA was going to handle the “small” acreage in the March report in order to make the corn supply and demand balance sheet work without projecting impossibly tight ending stocks. Well the answer was that you just have to push in a record yield to create record production and boom – you have a 1.5 billion bushel carry out. It is very easy to be a back seat quarterback USDA releases, but this outcome seems as improbable as getting pigs to fly. USDA is banking on the June acreage report coming in with a larger corn area and then reducing yield because of weather issues with the crop. It seems especially improbable given the large increase in corn area in the Northern Plains. Those acres are being planted under extremely dry conditions. Obviously USDA is quite optimistic about yield potential in these states!

The Ugly: Diesel prices are headed higher as stocks in the U.S. declined to 134.4 million barrels. As we move into the high demand season for diesel fuel, stocks are moving to below average levels. The U.S. economy is heating up as COVID19 moves into the rear view mirror. Combine this fact with increasing crude oil prices and you get the prescription for higher fuel prices this fall. The price rise in diesel has yet to peak and keeping your tanks full is a good strategy for the rest of 2021.