One of the main hindrances for the US commodity market is export competition from Brazil. This has increased to the point where Brazil has surpassed the United States on exports to China for both soybeans and corn. 

In the month of November, the United States exported 2.3 million metric tons of soybeans to China. Brazil’s exports to China for the month totaled 5.29 mmt, an increase of 108% from October. This shift comes at a time frame when the United States has typically been the largest soybean supplier to the world market. Year to date US soybean sales to China are 140 million bu less than a year ago. 

Given prospects for total South American soybean production to be from 25 to 30 mmt higher this year than last the US share of global soybean trade will likely decline even more. Even with tight US soybean stocks to use this lack of demand is pressuring soybean futures. 

Brazil has also passed the United States as the leading corn exporter into China. Data shows Brazil shipped China 3.22 mmt of corn in November with only a minimal volume coming from the US. Year to date Brazilian corn exports to China stood at 8.8 mmt at the end of November while the US had shipped just 6.5 mmt. This US corn volume to China was 50% less than a year ago. 

Total corn exports from Brazil are projected at a record 55.94 mmt for 2023 compared to 44.7 mmt in 2022. Brazil’s soybean exports for 2023 are expected to total 100.02 mmt, the largest volume on record. The previous record for soybean exports was in 2021 at 86.1 mmt. 

Reports are coming in of very early soybean harvest taking place in Brazil. While this is a very small volume of soybeans, it comes as the country is still making these record large old crop exports. Even if these soybeans do not make it to export channels, they will start to weigh on basis and make the country more attractive in the global market. China is booking February soybeans from Brazil and has January needs covered which leaves very little room for additional US exports. 

Much of the interest in the livestock industry recently has been the hog culling that is taking place in China to prevent infection of African Swine Fever. This activity started in October when 28.7 million hogs were slaughtered. This was an increase of just 3% from September, but a large 36.7% surge from October 2022. Cumulative hog slaughter for 2023 stands at 271.1 million head, a 17% growth rate from a year ago. 

This elevated slaughter rate has flooded the Chinese market with pork and dropped hog values 42%. The Chinese government is now buying pork for reserves in an effort to stabilize the hog market. The concern for the United States is that this will remove China as a pork buyer and lead to more cancellations of current purchases. China returned to the import market last week though and was the largest buyer for the week, easing these worries. 

There are hopes the upcoming Lunar New Year celebration in China will generate more pork demand, but we may not see enough to prevent a build in reserves to a burdensome level. 

What is a bigger concern in China is the ongoing deflation in the country’s economy. Deflation is when consumer demand drops even as the price of goods decreases and is often a sign of major economic issues. If this deflationary market continues it will impact all Chinese demand. China is the world’s leading commodity buyer, and their lack of demand would negate much of the world worry on potentially shorter crops in South America.  

The US cold storage report as of November 30th showed 2% less red meat in freezers than at the end of October and 11% less than a year ago. Beef supplies totaled 454.66 million pounds, up 2% from October but down 13% from 2022. Given heavier cattle weights and larger imports the US beef inventory will start to increase. Pork in freezers totaled 416.09 million pounds, down 5% on the month and down 8% on the year. This is still an adequate supply of pork, especially with consolidation taking place in the hog industry. Pork bellies came in at 46.98 million pounds, up 67% from October but down 14% on the year. 

The USDA has announced it will be holding workshops to cover Livestock Risk Management programs that are currently being offered to producers. The USDA says it will hold more than a dozen virtual and in-person meetings starting in January on new and expanded products it offers to livestock producers. The meetings will be hosted by the USDA’s Risk Management Agency and cover topics including Livestock Risk Premium and Dairy Revenue Protection. 

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