With the U.S. harvest drawing to a close, more interest is starting to fall on the South American production season. Following one of the driest starts on record in Brazil, record fast soybean planting has taken place. Rains have fallen in Brazil and farmers now want to get planting wrapped up before additional rains fall. Soils do remain on the dry side in Brazil though, and this is generating risk buying in the futures market. Argentina is reporting mixed soil conditions and are also showing signs of ongoing stress.

This drought is also impacting water movement in South America with parts of the Amazon the lowest in 120 years.

Chinese officials are reporting the country’s August hog slaughter at 24.42 million head. This is down 7.7 percent from August 2023 from the massive culling that was taking place a year ago in response to African swine fever outbreaks. China’s year-to-date hog slaughter is off 2.6 percent from the 2023 pace at 208.05 million head. This reduction in slaughter has brought China back to the global import market.

China may need to expand its pork imports as the country reported a September sow herd of 40.36 million head, down 4.8 percent from a year ago. While this may elevate the country’s pork imports, it will likely reduce their feed grain needs.

Chinese export growth data showed demand has slowed incredibly in recent weeks. Export growth for the month of September was up 2.4 percent, well below the 8.7 percent growth seen in August. This was also short of street expectations of a 6 percent increase in exports. This is the slowest growth rate since last April and indicates the global economy may not be as strong as thought. This is also adding to deflation issues in the country.

There is a potential development in the market that could end up having a detrimental impact on the world’s vegetable oil supply. Indonesia has announced plans to raise its biodiesel blend rate to 40 percent. Analysts claim that if this happens it will generate an additional vegetable oil demand of between 1.5 and 1.7 million metric tons per year. This would greatly reduce the volume of free vegetable oils in the global market.

Russia has been exporting large volumes of grain recently, and now officials in the country are stating they need to review its export methods. The Russian Minister of Ag has called a meeting with the country’s exporters to review their policies to make sure they are in line with the country’s balance sheets. The minister is going to meet with shippers as it is believed that grain is being exported out of Russia at values that are too low. It is also believed that Russia has been shipping excessive volumes of grain and this may be jeopardizing the country’s domestic reserves.

Russia’s grain production will be reviewed, and adjustments will be made immediately if needed. It is believed that this will impact Russian wheat exports the most, especially with drought cutting the country’s output. This is a great benefit for the U.S. as not only may it increase wheat demand, but possibly corn for feed as well.

In addition to this, the world’s leading wheat importer, Egypt, has announced plans to start scaling back the volume of wheat it imports. Egypt officials have stated they will start importing more corn to grind for flour and blend with wheat to extend domestic reserves. Greater availability and lower prices favor the use of corn where possible. This again is positive for U.S. exports.

U.S. livestock packers are starting to see negative margins as the price of available cattle continues to rise. Livestock producers are again holding animals longer, waiting for higher cattle markets to absorb some of the added feed grain costs that are starting to be seen. High-priced replacements are also reducing farmer interest in selling in the immediate market. This is forcing packers to push bids to get cattle deliveries. The lack of cows making their way into the supply line following recent culling is also limiting beef production and supporting futures. Unfortunately, this may start to impact retail beef values as well.

One of the greatest benefits for U.S. commodities right now is a lack of competition, mainly for corn and soybeans. What is raising interest in this development is that even with sharp losses in the Brazil real and a 4 percent rally in the U.S. dollar last month, very little selling is taking place in the Brazilian market. Typically, a strong dollar/weak real generates heavy selling as trade is tied to the dollar and revenue is higher on a smaller volume of sales. This is generating questions on Brazil’s export ability following recent increases to domestic consumption, and could reduce their share of the global market.

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