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Ag ownership questioned
Market Analysis
By Karl Setzer
 Foreign ownership in the U.S. ag industry is becoming more of a market topic. Legislation has been introduced to monitor foreign ownership of U.S. farmland and industries, including China. Foreign ownership of these has increased in recent years and U.S. lawmakers are concerned with the volume of land and food production facilities are owned outside the U.S. An oversight committee has been monitoring these foreign purchases, but accuracy of data has been questioned. Proposed legislation would allow the U.S. secretary of ag to sit on the Committee of Foreign Investment, which advises the president on such matters.
We are starting to see a seasonal shift in the U.S. export market. This comes with the start of the South American export program, mainly on soybeans. We have seen some harvest delays to the Brazilian soybean crop but not enough to offer significant market support, nor to cause a shift in soybean origination. The question now is if delays were enough to cause issues getting the Safrinha crop in Brazil planted, Brazilian farmers have set windows in which they can plant crops to give soils a rest between crops. While the rains seem negative now, they are giving the soil a full charge of moisture for developing crops which may give the country larger yields.
The U.S. corn export program continues to struggle with lackluster demand. The USDA trimmed corn exports by 150 million bu in the January supply and demand report but may need to make further adjustments given ongoing slow sales. While this seems negative, the downsizing of the U.S. corn crop from last year is lessening the negative impact on futures. Until the U.S. corn reserve climbs above a rationing level, the loss of exports will be muted.
Trade is also monitoring U.S. wheat exports, which have been very slow as well. This has not been as much of a concern as the U.S. suffered heavy losses to last year’s wheat crop from drought. The loss of exports has been partially offset by elevated domestic demand, mainly for feed. The price spread between corn and wheat has narrowed to just 75 cents at times which heavily favors wheat feeding. U.S. wheat production is expected to rebound this coming year, especially with improvement seen to soil moisture in the Plains states. The highest winter wheat acres in seven years will also allow reserves to build.
Not only is trade closely monitoring corn, soybeans and wheat exports, but beef and pork as well. In 2022, the United States exported a record 937,000 metric tons of beef and 1.49 million metric tons of pork. This demand on beef was the result of active Chinese buying to start the year. As the year progressed, China backed away from the U.S. as COVID closures in the country limited consumer demand. Mexico replaced China as the top importer of U.S. pork as the strong Mexican Peso gave buyers added power in the market. While this is supportive, the volume Mexico is importing is less than China’s. Thoughts are this will lead to higher U.S. pork supplies as the year progresses. There is more uncertainty on U.S. beef exports as Brazil has ramped up its exports in recent months, including to China.
Trade is also watching domestic beef and pork consumption. Economic concerns in the United States have shifted consumer demand more toward select grade of beef than prime cuts. 
Another shift in the livestock industry has been from all corn to more wheat in feed rations. The price spread between corn and wheat has fallen to less than $1 at times which highly favors wheat feeding. All feed grains have seen prices recede which allows animals to be held in lots longer. A concern in the market has been declining animal numbers, but weights are rising to compensate for lower feedlot numbers.
While market volatility has increased in recent weeks, there remains an underlying source of support for futures, that being our current stocks to use ratios on corn, soybeans and wheat. The current stocks to use on corn is 8.9 percent, which is just under the level where price rationing would be warranted. On soybeans, the stocks to use is at 4.8 percent, which is well into where rationing is needed. Until these levels get back above 10 percent on corn, at 7 percent on soybeans, trade will be hesitant to pressure values. The stocks to use in wheat is more adequate at 29.8 percent, but this is well below the level we had just a year ago.
The question in the market is how long our reserves will remain this tight. If the U.S. sees production rebound this year as much as predicted, we will see these levels build. Any decrease in demand would accomplish the same thing and may be more likely given the large crops being predicted for Brazil. This is especially the case on soybeans, where Brazil’s crop looks like it will be a huge 22 percent larger on the year. There is little doubt this will lessen demand for U.S. soybeans in the global market, with all eyes currently on China and how much of their trade the U.S. may lose.
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.