One of the greatest negative factors for the soy complex right now is the build in world soybean supplies. The U.S. soybean carryout at the end of this marketing year is expected to be 30 percent higher than last year at 340 million bu. This is up 76 mbu on the year. Current models indicate the U.S. carryout could increase another 40 percent to 50 percent by the end of the 2024/25 marketing year. The global soybean supply has steadily increased for the past three years and will again this year, given the large crop out of South America.

There are concerns over the next world soybean crop though, if a strong La Nina develops again to impact South American production. The last La Nina cut Argentine production by 50 percent from average.

Brazilian officials have reached out to Japan to try to gain a portion of that country’s beef import market. Brazilian beef exporters feel that Japan will find that country’s beef high in quality and consumer demand will be good. In turn, Brazil has offered its market to imports of Japanese Wagyu beef, which is considered by some to be the most premium product there is. Japan currently imports 60 percent of its beef needs, and 40 percent of these imports originate from the United States. The threat of losing this business is starting to have an impact on U.S. cattle futures.

Another U.S. trade partner has announced stricter testing on U.S. dairy cattle. Canadian officials claim all lactating dairy cows from the United States will need a negative bird flu test before allowed in the country. Authorities are also stating that a “voluntary” negative test result will be needed for all breeding and dairy animals. Canada will also start testing fluid milk imports for signs of bird flu. While these stricter requirements are focused on dairy animals, there are concerns testing may spread to beef animals as well.

The increase we have seen in farmer grain and soybean selling we have seen recently is giving the indication that farmer sentiment may be improving. Depressed commodity values have driven farmer sentiment to the lowest levels in recent years. Many farmers are voicing uncertainty over their financial situation and what challenges they may bring. In April this dropped farmer sentiment to its lowest level since June 2022, and the May sentiment was the lowest since May 2020. The rebound we have seen in commodity values over the past few weeks has improved the market outlook as even though cash markets are not where farmers want, they are well off recent lows.

Chinese officials claim the country will increase corn plantings by 1.5 percent this year to give China 297 million metric ton corn crop. This would be the second largest Chinese corn crop on record, despite corn values in China falling to their lowest level in over three years. At the present time the USDA is projecting China’s corn crop at 292 mmt. Land and input costs have also dropped in China to favor expansion.

Soybean plantings in China are forecast to decrease by 2.9 percent this year, but yield is forecast to increase 1.5 percent, giving the country a larger soybean crop. China is using less soy meal in feed rations, which is trimming demand outlooks. A result of these factors is a decrease in China’s import forecasts by 6.5 mmt on corn and 9 mmt on soybeans.

We are starting to see a noticeable difference in the market between the futures side and the cash side. The futures side of trade is being driven by production forecasts and daily weather conditions across the global market. This can generate wide price swings in futures for little apparent fundamental reasoning.

The cash market is being driven by old crop inventory and how buyers know there is a large amount of corn and soybeans yet to move before the new crop harvest. As a result, interior basis values are becoming more volatile as buyers are more inclined to post quick-ship bids rather than continue to pay a premium for an extended period. This will create much narrower windows of marketing opportunity.

The May cattle on feed report was released with numbers nearly identical to trade guesses. On May 1st the United States had 11.6 million head of cattle on feed, 1 percent less than a year ago. This is less of a decline for the U.S. cattle herd than what has been projected by some firms. April placements were down 6 percent from last year at 1.66 million head, which is not surprising given the tight feeder cattle inventory and high domestic feeder values. High market values led to elevated marketings in April with the monthly total 10 percent larger than last April at 1.87 million head.

The April cold storage has also been released. As of April 30th, the United States had 430.68 million pounds of beef in storage. This was down 1 percent from the end of March and a 5 percent reduction on the year. The high carcass weights we have been seeing are countering the lower slaughter numbers in recent months. The U.S. pork supply was 501.28 million pounds on April 30th, an 8 percent increase from March but 12 percent less than a year ago. The pork belly supply came in at 76.74 million pounds, up 3 percent on the month but down 6 percent on the year. The total red meat supply on April 30th was up 4 percent from March and 9 percent less than the end of April 2023.

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 collected from a variety of sources and is believed to be reliable but is not guaranteed to be accurate. This report is provided for informational purposes only and is not furnished for the purpose of, nor is it intended to be relied upon for specific trading in commodities herein named.