Current drought maps have 72 percent of the U.S. Midwest in drought. This is the highest drought volume in 21 years for that region. Not only is the U.S. Midwest experiencing drought conditions, but so is Canada. Canadian officials claim 70 percent of the country is suffering from abnormally dry soils. The highest concentration is in Alberta and British Colombia, where drought has been reported for the past four years. This is most concerning for Alberta as 46 percent of water use in that region is for irrigation purposes.

The International Grains Council has revised its updated global production forecasts. The world corn crop is forecast to total 1.223 bmt, up slightly from last year as larger crops in South America and China boost production. World wheat production is expected to increase 10 million metric tons this year to total 799 mmt. The world soybean crop is forecast at 413 mmt, up from last year’s 390 mmt.

The IGC is predicting a total world grain crop for 2024/25 at a record 2.33 billion metric tons. This is just above the world grain crop from 2023/24 of 2.3 bmt. World grain consumption is nearly equal to production, to leave the world with a grain carryout of 601 mmt for 24/25, up from 599 mmt at the end of last year.

Input prices in the United States have softened from recent years, and now we are seeing the same in other commodity production regions of the world as well. The most noted of these right now is in Australia, where fertilizers and crop production product costs are down 20 percent from last year. This has more than offset a 6 percent decline in Australian wheat values and will likely encourage more wheat plantings. Given forecasts for a shift to a La Nina weather pattern, we could easily see a much larger Australian wheat crop in 2024/25 than this year.

A trend is building in the U.S. feeder cattle market that is being closely monitored. Feeder cattle weights have been declining in recent months and are now averaging 50 pounds lighter than a year ago. This is mainly from cheaper feed grains and how this is allowing feeders to be brought in from pasture sooner than in recent years. This elevated feeder has brought the market back to test last year’s highs. A benefit for the grain market is this will increase the volume of feed that will be required to bring animals to market weight.

A major hog feeder in China has filed for bankruptcy. New Hope, China’s 3rd largest hog producer, has announced it is filing for bankruptcy reorganization. New Hope reported hog sales of 556,000 head per month in 2021 and revenue of $489 million yuan. Since then, New Hope has seen hog futures and pork demand slip lower. The combination of low hog values and losses from African swine fever have weighed heavily on all hog feeders in China. New Hope in the second hog feeder to file bankruptcy in recent weeks.

The question now is how this filing may impact China’s feed grain demand, as it will likely lead to further contraction in the industry.

Country movement of farm stored inventory has picked up in the past few weeks. The “store or sell” decision on open bushels from last fall led to these higher sales, as did a seasonal trend to core bins ahead of spring weather changes. The need to generate cash flow for spring inputs also tends to increase country movement at this time. Even with this elevated movement, basis values across the interior market are holding steady as buyers want to build stocks ahead of spring planting. There are also buyers who feel that without a rebound in cash commodity values we may see limited selling for the remainder of the marketing year.

At the same time, we are already hearing that some buyers have their needs covered through the remainder of the marketing year and have no incentive to firm bids.

China has made a shift in its oilseed imports in recent months from raw stocks to products instead. Import data from China shows the country imported 7.9 mmt of soybeans in January and 5.12 mmt in February. Total soybean imports to start 2024 are down 8.8 percent from last year. China imported 30,000 tons of soy oil in January, which was down 67.3 percent from 2023. February soy oil imports into China totaled 10,000 tons and were up a sizable 189 percent from last February. Year to date soy oil imports are up 49 percent.

By importing oil rather than whole soybeans, it saves a large amount of unload time in China and product can make it into the supply line much faster.

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