This fall’s weather conditions are causing a slower than average harvest pace. The harvest pace varies considerably across the Corn Belt though, with some areas making good progress while others are just getting started. This is starting to become a concern for stands, mainly on soybeans. Reports of soybeans swelling to the point where pods break open are being reported in regions where rains have persisted.
One of the biggest concerns we are hearing with this year’s delayed harvest is what it may mean for production, but there are other factors that could be just as costly. For one, a later harvest tends to mean crops do not dry down as much in the field and require commercial drying. This can be a costly need, and lower net revenue. Even if dried on the farm, this means extra handling costs, and likely bushel shrink as well. History also shows that later harvested crops tend to be harder to store and hold through the marketing year.
Another concern is that harvest may be pushed back far enough to again be a factor in fall tillage. Some regions of the Corn Belt experienced harvest delays last fall and were unable to get the amount of fall tillage completed that was hoped for. This left more work than usual for last spring, which was also impacted by persistent rains. This snowball effect was a big factor for the large number of unplanted acres the U.S. experienced this year. While it is too early for trade to start pricing this into the market, it is a factor that will be monitored, as the U.S. cannot afford another short production year.
Official export data for the month of September has been released with mixed indications. For the month, the U.S. exported 79.8 million bushels compared to 111.2 million bushels in August and 206.9 million bushels in September 2018. Soybean exports in the month totaled 142.9 million bushels, down from the large 181.2 million bushels in August, but above the 119 million bushels sold a year ago. Wheat sales totaled 85 million bushels in September compared to the 94.5 million bushels in the previous month, but well above the 67.9 million bushels of a year ago.
The greatest concern with these totals focuses on corn. Demand for U.S. corn in the global market has been down all year. We are now at the stage of the marketing year where demand starts to pick up though, which has eased some fears on meeting our projected totals. That said, weekly corn sales need to average 37 million bushels for the remainder of the year to prevent a shortfall in demand, which is almost twice the recent pace we have seen.
The main reason for the slow demand pace on U.S. corn is elevated competition from Brazil. Brazil’s October corn shipments totaled 6.14 million metric tons. This is nearly twice the volume of a year ago where exports were 3.14 million metric tons. Brazil soybean exports in October reached 4.87 million metric tons, which was down from the 5.22 million metric tons in October 2018. Improved U.S.-Chinese trade relations cut into Brazil’s soybean exports last month, as did a total reduction to Chinese demand from African Swine Fever.
Data indicates yearly Brazilian soybean demand is currently being underestimated. Last week Brazil exported 889,000 metric tons of soybeans. While this was less than the 1.48 million metric tons from the U.S., the pace leading up to now has been higher. The USDA is currently predicting Brazilian soybean exports this year of 69 million metric tons which would be down 18% from 2018. The current pace is only down 15% on the year though, indicating yearly demand may be closer to 70 or 71 million metric tons.
Argentina is seeing record corn exports take place as well. From January through the end of August Argentina exported 24.9 million metric tons of corn. This is already more corn that Argentina has exported in any full year, including the previous record year of 2016. That year Argentina exported 24.5 million metric tons over 12 months. This year’s Argentine corn exports are the result of the record crop the country harvested a year ago and potential tax changes.
This strong demand for South American corn has benefited U.S. soybean exports. Brazil and Argentina continue to export record volumes of corn which is using much of the port space in those countries. As a result, very few soybeans can be exported, which pushes demand to the U.S. by default. It is also likely that price is a factor, as once tariffs are removed, U.S. soybeans become the most affordable in the world market.
One bright spot for corn demand has been Mexico. Yearly corn sales to Mexico are 55% of total commitments. Trade is closely monitoring Mexico’s buying interest to see if it changes ahead of the proposed USMCA agreement. There are also thoughts Mexico will turn back to South America for needs as shipments to other buyers from those sources slows.
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.