This week we have seen interest in the market shift from being totally focused on the U.S. to seeing more interest on South America as planting season gets underway in that region. One of the main topics right now is intended acreage given recent dry weather. Argentine officials have stated they believe 5 million acres of intended corn acres may be seeded to soybeans due to better returns. It is thought total corn acres in Argentina will decline from 17 percent to possibly 30 percent.

We are now hearing reports that Brazil’s soybean acreage may increase their least amount in the past decade this year. China’s COFCO group believes Brazil will seed 116 million acres of soybeans this year, just above year’s 113.6 million acres. COFCO still believes Brazil can produce a soybean crop of 168 million metric tons this year compared to last year’s 147.4 mmt if normal weather conditions return.

As planting commences in Brazil, so does the attention to weather in that region. Drought conditions appear to be worsening in Brazil with no significant rain expected to the driest areas for the next two weeks. This is starting to push drought conditions into the start of the rainy season in Brazil. October is the optimum planting month in Brazil with 75 percent of the crop seeded in the month. If soybean planting is delayed, so will be the start of the safrinha planting window.

We are now hearing from ethanol authorities in Brazil who are already showing concern over the country’s next sugarcane crop. This may further elevate Brazil’s domestic corn demand to fulfill ethanol demand needs that continue to rise and lessen competition for the U.S. in the global market.

There is also growing concern over the strengthening La Nina weather pattern ahead of South America’s production season. Argentina tends to see the worst La Nina conditions with recent events cutting corn and soybean production by 50 percent. We are already seeing weather stress on the Argentine wheat crop where abandonment is already taking place. Southern Brazil can also be affected by La Nina events.

There is a change taking place in how Brazilian farmers market their crops that is impacting global trade, especially on soybeans. Historically Brazilian farmers sold much of their soybean crop in advance to cover input costs. This is one of the primary reasons, along with a lack of storage, that Brazilian farmers marketed much of their soybean crop right out of the field.

Over the past several years, Brazilian farmers have produced larger crops and built storage as the country’s ag economy improves. As a result, farmers in the country can market less of their crop for harvest delivery, which leads to a reduction in forward selling. Brazilian farmers have also benefitted from higher yields, lowering the volume of soybeans needed to be sold on a whole. According to Agrinvest, Brazilian farmers have currently marketed just 18 percent of their 2024/25 soybean crop but have 90 percent of their inputs purchased. This will lead to more competition for a longer period in the global market as well.

The U.S. hog market is receiving mixed signals from the Chinese hog industry. China is reporting a July sow inventory of 41.4 million head. This is up just under 1 percent from June, but a 5.4 percent reduction from July 2023. Hog values are stabilizing in China, and as they do, hog inventories are leveling as well.

Cash hogs in China have seen considerable pressure though, with values falling 7.2 percent in just the past two weeks. The cash market is still being pressured from the glut of pork following the massive culling at the start of the latest African swine fever outbreak. China is also working through its heavier hogs that were raised prior to recent changes in feeding limits. Low consumer confidence is also pressuring pork values in China, with some restaurant chains closing due to poor sales.

This shift in China’s hog market has again brought the country’s future commodity imports into question. This is not just on pork, but on feed grains and other products as well. Changes are also taking place to how Chinese importers book coverage as they do not see an advantage in forward contracting, especially if needs are uncertain. This is one of the primary reasons why we are now starting to see China cover fall and winter needs on soybeans where they have a 30 to 35 million metric tons void in purchases.

We are starting to see seasonal pressure build in the U.S. cash markets. Farmers have started to trickle in some of their old crop inventory, and while the pipeline remains thin, deliveries are enough to satisfy demand. This has caused basis values at most interior locations to soften, especially with this year’s harvest rapidly approaching. Transportation issues on U.S. rivers ahead of the U.S. harvest is also causing buyers to soften bids.

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