The United States has seen the return of China as its leading commodity export destination. The U.S. has now recovered nearly all business that was lost from the trade war that started in 2018. For the year 2020 China accounted for 25% of all U.S. agricultural exports, equal to what it was prior to 2018. The question now is if Chinese demand will continue to build, and more importantly, if the U.S. will be able to provide much more in the way of commodities than it does now. 

One benefit for U.S. exports has been the lack of competition from South America especially in recent months. Brazil exhausted its exportable surplus and Argentina has been slow to make sales given recent tax hikes. This is starting to change on both fronts and U.S. demand is slowing as a result. Even with delayed harvest and loadings, buyers are willing to wait for the cheaper offerings from these countries rather than extend U.S. purchases. There are also thoughts the delays to the Brazil harvest will string out its export window and leave little additional business for the U.S. prior to the next harvest. 

When it comes to loadings the most interest is currently on China. This will now shift from soybeans to corn as Brazil becomes the leading source for that commodity. China has several million bushels of corn booked from the United States they need to take delivery of. There have been concerns China may wash out of these, and while possible, given China’s overall need for corn is diminishing the likelihood of major cancellations. Doubts over the size of South America’s corn crop is further reducing the possibility of cancellations. 

Trade continues to look at our current export sales commitments and what is needed for the remainder of the marketing year. Given the recent pace of sales, we only need to sell 11 million bu (mbu) of corn and 1 mbu of soybeans per week for the remainder of the marketing year. While sales this low are possible, it is highly unlikely we will not see demand outpace these levels. As a result, not many analysts believe the current sales estimates set by the USDA. 

One issue that needs to be closely monitored in Brazil is the ongoing spread of Covid-19. While cases have been slowing in other countries, Brazil has seen its numbers rise. There are now concerns this could cause logistic issues and possible delays to exports if conditions get worse and labor strikes take place. The concern is what this may mean to an already struggling export program for the country. 

Most of the drought talk in Argentina is what the impact has been on crop production, but the country may face other issues as well. The main one would be on river logistics. Last year when Argentina turned dry; restrictions were placed on barge drafts in Argentina which limited the amount of grain that could make to export terminals. There is a legitimate chance of this taking place again this year. As a result, exporters are pushing to move as much inventory now ahead of any disruptions, including paying a premium for immediate deliveries. 

We continue to see a shift in global feed grain demand that is being closely monitored. For the past several months we have seen an elevated use of wheat in feed rations as both availability and price has been more favorable than corn. We are now seeing some countries shift to barley feeding in place of corn and wheat, including China. There are even thoughts this could lead to elevated barley planting in the global market, displacing other acres. 

There are more signs of an improving economy that are supporting commodity values. This is not just in the United States, but around the world. The global economy has rebounded 5.6% this year and is expected to show another 4% of growth next year. As a result, more consumer spending is expected. The concern with this is that we also see inflation and the growth is restricted. 

One sign of the improvement is an increase in energy products demand. Gasoline demand in the United States last week was the highest of the past year as more travel restrictions from Covid-19 are lifted. There are now thoughts that by summer we will see gasoline demand approach 2019 levels as more easing takes place. In turn this is elevating ethanol demand as well. If gasoline demand rebounds as much as estimated, it could add as much as 200 mbu of corn demand to the current projection. 

The recent warm up in temperatures across the U.S. is being welcomed by the export industry. This is from the fact that ice is rapidly melting on many U.S. rivers, including the Mississippi. As a result, we will soon start to see elevated deliveries to the gulf for loading. The most attention is currently on corn as the U.S. has a tremendous volume sold and shipments need to build if it is all going to be moved in the current marketing year. 

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.