Trade remains concerned with the old crop soybean sales cancellations that have taken place. China has washed out of several soybean purchases from the United States in recent weeks. This generates concerns over the 104 million bushels of remaining purchases China has on the books. This accounts for half of all U.S. unshipped sales. If these are cancelled rather than rolled to new crop, they will have a significant impact on U.S. balance sheets.
Not only has the U.S. seen a decline in Chinese soybean demand this marketing year, but so has Brazil. Even though we have seen a jump in trade between China and Brazil in recent months, yearly trade is down. So far this marketing year Brazil has sold 39.58 million metric tons of soybeans to China compared to 46.3 million metric tons a year ago. This is further confirmation of the demand reduction China is seeing from African Swine Fever.
Brazil has seen an increase in Chinese corn buying, however. In the month of July, Brazil exported a record 6.3 million metric tons of corn to China. Given this pace and the size of this year’s Brazilian corn crop it is believed China may import a large 40 million metric tons of Brazilian corn this year.
Given the continued decline in Chinese hog numbers from the spread of African Swine Fever, this demand may be slow to return. Chinese hog numbers for the month of July were down 32% from the same month a year ago. This follows a hog reduction in June of 25% from the same month a year ago. This reduction is the primary reason we continue to see China listed as a buyer of U.S. pork, even with tariffs in place.
While much of the global trade interest has focused on the United States and China, Argentina is starting to take center stage as well. China has placed a bid to dredge out Argentina’s shipping channels, with most interest on the Parana River. This is important to Argentine trade, as 80% of Argentina’s exports flow down this river to export terminals. The goal of this is to make the river deeper which would allow larger vessels to come inland for loading, making trade between the countries cheaper. China is already Argentina’s largest soybean export destination, and this improvement would allow China to buy more of all ag products.
Some Argentine officials are hesitant to take this offer however, as they feel it would make them too dependent on Chinese buying and could impact their overall ag economy.
There continues to be a large amount of debate in the market over this year’s planted acreage projection from the USDA, mainly on corn. This discrepancy is from how the data was collected. Corn acres for all purposes were included in the August number, not just corn that will be grown for grain. This means corn for feed and even corn that was planted as a cover crop was used in the 90 million planted acre figure. There is little doubt we will see harvested acres change because of this, but the real question is how much.
We are seeing interest shift to fall weather forecasts, mainly how this year’s corn and soybeans will finish out the growing season. The majority of the Corn Belt sees its first frost or freeze of the year by mid-October. Given the slow maturity of this year’s crops, field scouts claim crops will need to make it to the end of October without this taking place to fully mature. While avoiding a frost until then is possible, it does not seem likely to happen at this time.
The real question when it comes to an early end to the growing season is what it may mean for production. In all likelihood, an early frost will not directly impact bushels. What it can do is lower test weight though, and bushels can be lost from this factor.
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.