Although early, we are starting to receive yield reports from across the Corn Belt. It is no surprise that these vary greatly from region to region. Yields are being reported as much less than initially expected to the “best ever” from area to area. This is not that surprising given the stretched-out planting season and variable weather the crops were subjected to all growing season. This makes it very hard to pin down a realistic yield estimate at this stage of the season.
China has made several purchases of U.S. soybeans in recent weeks, with the past month’s total approaching 3.5 million metric tons. This has failed to generate as much market support as some have hoped for though. This is because China has been the primary buyer of soybeans, and without their business, sales would fall short of needs to meet yearly projections. There is also doubt over how long China will continue to buy soybeans given their overall reduction to demand due to African Swine Fever.
Census export data for the month of August contained mixed numbers. Corn sales for the month were less than half of a year ago with just 111.2 million bushels. Soybean sales for the month were a record though at 181.2 million bushels. Of these soybean sales, 98.6 million bushels were with China. Wheat sales for the month were also high at 94.5 million bushels, the greatest monthly amount in three years.
Meat exports for August were also released by Census. Beef exports for the month totaled 261.25 million pounds, a 9.4% reduction from 2018. Pork sales were more positive with 508.6 million pounds. While this was a record for the month of August, the total was 6% less than July’s sales.
Planting conditions in Brazil have improved in recent days, but progress still lags normal advancement. An estimated 3% of Brazil’s soybean crop has now been planted compared to the 9.5% that was planted at this stage a year ago. This is the slowest start to Brazil’s planting season in the past six years. This does not mean Brazil will produce a smaller soybean crop, but it could impact double cropping if delays linger, and be a factor for Brazil’s second crop of corn.
Even with the slow soybean planting in Brazil we are starting to see more estimates on total acres. According to the Brazilian consulting firm Safras, plantings on the initial soybean crop in Brazil will be up 8.5% from a year ago. This is considerably different than the firm’s projection of a 2.8% decrease in soybean plantings in July. A rebound in Brazilian soybean values has changed the opinion on plantings for many Brazilian farmers. Total production is only forecast to be up 2.1% in Brazil though as farmers are not expected to spend as much on inputs as in recent years due to the overall weakness in the soy complex.
We have also seen an increase in Brazilian soybean sales in recent weeks on the elevation in values. The first Brazilian soybean crop is now 26% sold which is just under the volume sold last year. The total is 3% greater than average though. Brazil has also seen higher demand from China as trade issues with the U.S. linger. Global soybean demand on a whole is down from last year as African Swine Fever continues to cut demand in the Asian market.
We are starting to see trade place more interest on how long this fall’s harvest could take. This is more on soybeans, as many of the U.S. winter wheat acres are planted after soybeans are harvested. Any delay to soybean harvest could cause a delay in wheat planting, and in turn, reduce wheat acres in some areas. At the same time we are likely to see more winter wheat planted in regions where fields were unplanted this year, mainly in the Eastern Corn Belt.
There are two main factors that may have more of an influence on commodity demand this year than those in recent history: the global economy and the U.S. dollar. There are concerns that the global economy is slowing which in turn may lower commodity demand. Historically investors have placed money in commodities as a type of “safe haven” placement when we see economic uncertainty. This has not been the case recently though, as we have seen more investment being done in the U.S. dollar. This drives up the price of commodities for a foreign importer which can also slow demand.
The announcement of the President’s biofuel package has been met with limited interest by trade. The main reason for this is the lack of commitment the package included. The main one being the volume of ethanol to be mandated, and how it will be “about” 16 million gallons. This really is not that much more than we have mandated now, but given waivers, the actual amount being blended is much less. This total is also up for debate and could change before the package is finalized.
This commentary is the sole opinion of Karl Setzer, market adviser for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl at email@example.com. You can also follow Karl on Twitter via @ksetzergrains.