Economists do not believe we are seeing enough rationing in the US soybean market. While soybean futures have rallied to their highest level since 2016, they trail other oilseed values in the global market. The main one is canola which is currently at its highest value in 7 years. Palm and sun seed oils have also rallied to multi-year highs. This continues to push oilseed buyers to the United States, further tightening soybean supplies. 

The other side of this rationing story is how much is needed at the present time. While US soybean inventory is going to drop to a historically low level there are thoughts the bulk of our export sales are now behind us. Sales have decreased considerably in recent weeks and the harvest of the Brazilian crop is rapidly approaching. This is why soybean traders have been hesitant to push the soy values, but it could also be setting the complex up for elevated volatility. 

We are starting to see a split in opinion when it comes to US commodity demand. US corn sales currently total 1.45 billion bu. Given this volume we only need to see average sales of 30 million bu per week for the remainder of the marketing year to reach our projected goal. Soybean bookings currently total 1.98 billion bu and only need to average 7 million bu on a weekly basis. The difference is in loadings, as soybean loadings are also ahead of average, while corn loadings are 3 percent under expectations and continue to fall short of the needed amount per week. 

Another discrepancy in the market at the present time is on Brazil corn production. The size of Brazil’s first corn crop has been reduced in recent weeks due to the dry conditions. This expected to be made up for with a larger second Safrinha crop, however. It is believed this crop will be 14 percent larger than last year and more than cover losses to the initial crop. Several analysts believe Brazil’s total corn production will fall between 106 and 107 million metric tons, but a few claim it will be closer to 113 million metric tons as plantings are set to increase. 

Drought continues to take place in the Southern US Plains. Right now this is having the most impact on wheat as the conditions of the crop in that region has deteriorated in recent weeks. Before long this will start to impact corn and soybeans as well, especially if it looks like the drought will last into spring. The longevity of this drought depends heavily upon the La Nina event as that is a typical result of the weather pattern. 

Another impact from this drought could be felt in the livestock markets. Last fall we saw cattle being brought into feed lots sooner than normal as pasture conditions deteriorated in the region and grazing was not an option. If conditions do not improve in the near future, cattle producers may start to rethink their herd sizes. This is especially the case if feed grain values remain elevated. 

World wheat crop expectations are starting to increase. Australian officials have increased their wheat production estimates. Australia is now projecting a wheat crop of 31 million metric tons this year but are quick to claim it could be higher. Some forecasts indicate a 34 million metric tons crop which would be just under the record of 35 million metric tons set in 2016. Even Russia is giving the indication their wheat crop is larger than thought as they are considering an increase to their export quota. 

Much of the North and South American weather continues to be driven by the La Nina event. Forecasts now indicate this pattern will remain in place through January. If correct, this will dictate South American weather into the Brazilian harvest and could impact final crop development. If the La Nina lasts longer than January it could easily impact double cropping as well. 

We are starting to see several analysts release their estimates for this coming years US production and ending stocks. This is not uncommon once we start seeing estimates released for new crop acres which is taking place. If we use current demand and trend line yields, new crop corn stocks will likely be little changed from this year which is not a number that would cause much more buying that we are currently seeing. Balance sheets on soybeans may tighten even further next year, even if acres increase as much as predicted. This is starting to offer more support to the deferred soybean contracts. 

We are seeing several changes take place to the global commodity market that could end up have significant changes to demand figures. In the past few weeks we have seen several countries impose export tariffs to limit sales and help ensure adequate domestic reserves. Others have removed import taxes to allow stockpiling of commodities, mainly food grains. This will likely cause an increase in global demand, and likely benefit US exports. 

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named.  This is not independent research and is provided as a service.  As such, this is considered a solicitation.