Not only has volatility picked up in the futures market recently, but in the cash markets as well. Heavy movement has been noted ever since the January stocks and balance sheets were released, and this has filled the domestic pipeline back to a comfortable level. This has applied some pressure to interior basis values, but not as much as one would expect.

Several regions of the Corn Belt report farmers have liquidated 75 percent of last fall’s harvested bushels, leaving little inventory to market over the next 10 months. This puts the commercial crowd in control of the cash market and higher bids will be needed to encourage movement as interior buyers are now competing with a strong export market for bushels. We are now in a sellers’ market, and this tends to favor basis values long-term.

The slow start to the Brazilian soybean harvest and export program has impacted global trade, especially into China. For the first three weeks of January, Brazil exported just 625,000 metric tons of soybeans, a 1 million mt decline from the same period in 2023. China has been counting on these soybeans to fill crush reserves and now soybean shortages are being noted.

Over the past four weeks, China has imported 3.7 mmt, with the bulk of these coming from the U.S. These soybeans are used for storage needs though and do not make their way into crush facilities. Some of China’s crushers are now concerned they may deplete their soybean reserves. The question now is if China may book some quick ship U.S. bushels, or possibly turn to soy product imports to save time when delivered.

The United States’ Energy Information Administration has released its long-term gasoline price outlook. The EIA believes average gasoline costs will be down 11 cents per gallon in 2025 from 2024. The average cost of gasoline is expected to decline another 18 cents in 2026 for a total decline of 9 percent in the next two years. Lower crude oil price outlooks and an overall decline in gasoline demand are behind the lower price forecasts.

While this is positive news for the U.S. consumer, it does not bode well for the ethanol industry that is already facing negative margins. Some U.S. ethanol plants have been shuttered due to poor margins, and if exports start to slow, more closures are possible, even if just temporary.

A pressing story in the market recently has been the announcement that Argentina will temporarily lower its export taxes on soybeans and corn. The current export tax on soybeans is 33 percent and this will be lowered to 26 percent starting next Monday and running through June 30th. Lower taxes will be seen on soy products as well, dropping from 31 percent to 24.5 percent. On corn the export tax will drop from the current 12 percent to just 9.5 percent.

Argentine officials claim improved economic conditions and a need for farmer assistance to cover the production losses from this year’s crops. While there are several different reads on this move, the fact the government is concerned with the country’s crop sizes is worth noting.

The January 1 U.S. cattle inventory report came in as expected. On January 1, the U.S. had 86.7 million head of cattle, the lowest amount since 1951. This was 99 percent of the year ago inventory, and up 1 percent from the previous inventory report. What is becoming more of a factor is the amount of beef the U.S. is producing, which has steadily increased even with declining slaughter numbers.

The United States has seen its beef export competition from South American dwindle in recent years, but Australia has stepped up its beef sales at the same time. Australia is reporting 2024 beef sales of a record 1.34 million metric tons, a 24 percent increase from 2023. This was 4 percent more than the previous record set in 2014. Improved cattle production conditions are a primary reason for the elevated Australian beef exports, as was a reduction in U.S. beef exports due to the lower cattle lower supply. Improved trade relations with China also benefited Australian demand.

U.S. beef carcass weights continue to rise and are offsetting a good portion of the decline we have seen to the U.S. cattle inventory. The current U.S. cattle inventory is the lowest in over 50 years. That said, the average carcass weight in the U.S. was below 700 pounds per head in 1970. By 1990, it had risen to 750 pounds. This year, the USDA is forecasting an average beef carcass wight of 833 pounds.

Actual slaughter data shows carcass weights are much higher though, averaging well over 900 pounds, an increase of 40 pounds in just the past year. Feeders have struggled to find replacement cattle and are opting to hold current inventory longer. While this has raised beef weights, it has also impacted quality, with carcass ratings falling 2.6 percent in the past year.

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