We are starting to see a well-defined difference in opinion form on U.S. corn and soybean crop potential. One side is predicting very high yields, with some analysts now topping the USDA balance sheet yield of 183.1 bushels an acre. This is from the lack of an ongoing weather threat across the Corn Belt. While this is possible, market bulls are pointing out how acreage losses will give us smaller total crop sizes even if yields do come in above trend. This debate will take place until well past the U.S. harvest this fall. The same is true on soybeans, where any loss of acres could put us in a rationing position, even with a 53.2 bushel an acre yield.

While weather in the United States has been mostly favorable this growing season, global conditions are less than perfect. One of these regions is Ukraine, where the country’s grain production has been cut a reported 6 mmt this year from heat. China has also been suffering from extreme heat which is expected to last through August. In July, China’s average high temperatures topped 95 degrees Fahrenheit 20 times. Even more heat may be seen in August with some forecasters predicting regions seeing highs near 110 degrees. There is little doubt this weather is impacting production in China, and also altering their import needs.

Not only are economics impacting U.S. agriculture, but ag on a global scale. One of most interest is in Brazil where farmer sales of safrinha are down 20 percent from normal. Farmers in Brazil are not satisfied with current market values and have opted to store much more corn than normal. The increased use of temporary storage in Brazil and expansion to existing storage facilities are allowing farmers to hold more inventory for longer periods of time.

The question now is if corn values are attractive enough to encourage additional Brazilian corn plantings this coming year, and economists do not believe they are. The USDA is currently predicting a 2-3 percent increase in Brazil corn plantings in the 2024/25 crop cycle, but sources in Brazil believe we will be lucky to see acreage hold steady from last year, and most expect to see corn plantings decline.

The state of the global economy is not only driving commodity futures, but all markets. The concern in the global economy is the lack of demand we are seeing from the consumer side. This is most noted in China where deflation is curbing consumer spending even with lower product costs. The most noted of these has been restaurant demand, where not even a 25 percent drop in retail prices has encouraged spending. The latest jobs report in the U.S. was more negative than expected, which is also impacting commodity demand outlooks.

The positive side of this economic downturn is it will likely lead to lower interest rates, and in turn, lowering operating costs for U.S. farmers. Economists now feel more confident we will see a drop in interest rates this year, with the odds of a September cut reaching 80 percent. The question is how much of a reduction we may see, with some individuals believing it will be 50 basis points.

Analysts in Brazil do not expect to see much for acreage expansion to this coming year’s soybean crop. Analysts in Brazil believe soybean plantings will expand by 1 percent at the most this year, but likely less. Lower returns, higher input costs, and a decline in global oilseed demand are leading reasons for lower acreage estimates. By comparison Brazil’s soybean plantings expanded 4.5 percent last year and 6 percent the year before. Trade paid little interest to this forecast though as Brazilian farmers have a strong history of planting more soybeans than initially predicted.

U.S. renewable diesel imports are rising at a rapid rate. For the first five months of 2024 U.S. renewable diesel imports averaged 30,000 barrels per day, a 24 percent increase from the same period in 2023. Larger production in the U.S.’ main renewable diesel supplier Singapore is a main reason for elevated imports, as is added U.S. storage capacity. Nearly all these imports are on the West Coast, which is where our highest demand is.

While the U.S. is seeing elevated imports of renewable diesel, ethanol exports are rising. The latest Census export data shows the U.S. loaded out 146 million gallons of ethanol in the month of June. This was a 31 percent increase from the 111 million gallons that were exported in June 2023. Canada remains the top ethanol trade partner with 44.6 million gallons of imports. This is followed by the United Kingdom with 25.9 million gallons and India with 14.8 million gallons.

Argentina officials have announced that they will be lowering the country’s export tax on beef to 6.75 perent from the current 9 percent tax rate. This was one of the reasons cattle ranchers in Argentina voted for President Milei in last year’s election as he stated he would reduce taxes if elected. While this will make Argentina’s beef competitive with the U.S., it may not impact our exports that much given the smaller beef herd in Argentina. Quality will also limit demand for Argentine beef, as their product tends to grade lower than U.S. beef.

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