Weather remains an underlying factor in today’s trade, mainly the recent storm that moved through the Upper Plains. This brought heavy snows to the region, with parts of North Dakota seeing close to 3 feet. Much colder temperatures have settled in across the region as well, bringing an end to the growing season as they do. These events have undoubtedly caused production loss, but it may be days or weeks before we know an exact amount.

The crop that may be most impacted by these conditions is the North Dakota spring wheat. Farmers in these areas are saying they will abandon the wheat that is left standing in fields as the quality was poor to begin with, and the snow that has fallen will generate even more of an issue. This would have more of an impact on commodity futures if not for the large wheat supplies the U.S. has as a backstop.

Rains have started to fall in some of Brazil’s driest production regions. As a result, soybean planting is moving forward. Progress is still slow, with a reported 9% of the country’s soybeans planted compared to the average 20% for this date. Analysts in Brazil have started to rethink their acreage estimates though, as soybean values have now rallied to a level not seen in Brazil for several years. The real unknown in Brazil remains how much double cropping we will see if planting remains slower than normal.

We are already starting to see projections released for next year’s acres in the United States. Thoughts are we will see plantings of 95 million on corn and 85 million on soybeans. There are two very different ways these projections are being viewed. One is that we will need plantings this high to make up for losses this year. Another is that unless we see a build in demand, acres this high will cause a significant build in corn and soybean reserves and pressure values.

The real question is what effects these acreage sizes will have on corn and soybean reserves. If all other factors remain constant from this year, corn acres of 95 million would lead to a potential 2020/21 carryout of 3.4 billion bushels. While this seems like a stretch, it is quite possible in today’s market environment. The same scenario in soybeans would point to a more tolerable carryout of 740 million bushels.

Even with tariffs in place, China has been actively booking U.S. soybeans in recent weeks. These have mostly been for October, November, and December delivery which is not that surprising, as that is the span between crop years in South America. Traders want to see China booking soybeans past this time frame to be considered bullish for the market.

Not only is the United States seeing sluggish soybean demand this year, but so is Brazil. The USDA is projecting Brazilian soybean exports of 69 million metric tons this year, an 18% reduction on the year. For the Brazilian marketing year, which ends in February, Brazil has exported 61.3 million metric tons of soybeans. This is a 15.6% reduction from the previous year, but we are now at a stage where demand normally starts to slow for Brazil’s offerings. As with the United Sates, this decrease in exports is due to the spread of African Swine Fever in Asia cutting demand.

When it comes to export demand, the greatest worry remains on corn. U.S. corn is currently the highest priced in the global market which has dampened demand. The most competition is coming from South America and Ukraine and likely will be for the foreseeable future. We have also seen the spread between corn and wheat narrow, which has impacted feed demand in several instances.

The Chinese government has released data showing how much their hog herd has contracted in the past two months. In August, China’s hog herd was down 38.7% from the same month in 2018. Hog numbers in September were down 41% from a year ago. Thoughts are actual hog declines have been even greater than these numbers indicate. As a result, we have started to see China’s soybean demand slip, with September imports being down 13.5% from August.

This decline in domestic pork production has led to elevated imports. China’s September pork imports were up 76% on the year, with cumulative imports for 2019 up 43.6% from 2018. Beef imports in September were record sized and up 50% from the same month a year ago. For the year, China has imported a large 53.4% more beef than the same time frame in 2018.

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 ksetzer@agrivisor.com. You can also follow Karl on Twitter via @ksetzergrains.