Export data out of China shows just how far its soybean imports have been reduced this year due to African swine fever (ASF) and the U.S. trade war. China’s June soybean imports were down 11.5 percent from May, as the country’s hog herd was reduced.

June 2019 soybean imports were also down, 25 percent from June 2018. For the calendar year, China has imported 6.51 million metric tons fewer soybeans than a year ago. This brings into question the entire soybean demand figures being issued by the USDA.

The drop in Chinese hog production has been great enough that feed mills are starting to close, including ones owned by Cargill. These losses in China’s hog herd are impacting the country’s financial stability. Its gross domestic product, a tool used to measure financial soundness, is only expected to show a growth of 6 percent for the April-June quarter.

This is the least since 1992, and the result of both the U.S. trade war and economic losses from ASF. The concern is what ripple effect this may have on the global economy if China backs off on all imports and investing.

Not only are we seeing doubt on soybean demand, but corn as well. The United States is seeing less than hoped-for demand as buyers are opting for cheaper offerings in the global market. The main competition is coming from Argentina and the Black Sea.

There is uncertainty on domestic corn demand, as more ethanol plants are reported to be slowing operations. Heavier use of wheat as a feed grain is also competing with corn in the domestic market.

Wheat harvest is progressing across the U.S. and as it does, more yield data are being collected. Yields are being reported as above average, but so are toxin levels; so far, the most attention is on vomitoxin. The combination of these two factors could easily lead to more wheat being used as a feed grain this year.

We are also starting to see more accurate yield data on the global wheat crop. Russian officials have reduced their wheat potential due to late-season drought conditions. In turn they have reduced their export forecast by 4.6 million metric tons.

At the same time, Ukraine officials have upped their wheat production estimate, putting the total crop as 17 percent greater than a year ago. While these factors do open the door for more U.S. export potential, the fact the U.S. is the highest-priced source for wheat in the world market is a hindrance to sales.

Farmer movement across the Corn Belt remains mixed. Heavier movement is taking place in the Western Belt, which is not surprising, as that is where crops look the best. Farmers are more comfortable in making sales when crops look good.

Movement in the Eastern Corn Belt is lower, as that is where most production issues are taking place. This is especially the case on corn, where substantial premiums have been paid to entice deliveries. These premiums are starting to take a toll on processors, mainly ethanol manufacturers.

Reports are starting to come in that ethanol plants have been forced to pay upwards of 75 cents over Chicago futures to try to secure needs. Even with this, farmers have been hesitant to sell, as they do not know how much old-crop inventory they may need to cover new-crop sales.

Others are simply holding out for higher values. We are now hearing reports of ethanol plants halting operations until movement picks up, which may not come until the fall harvest.

Weather remains a primary topic in today’s trade. We have started to see a shift in attitude, though, with regions of the Corn Belt that were previously flooded now claiming they could use precipitation. This is especially the case in the east, where unseasonably warm temperature have sped up soil moisture losses.

There are also some concerns over the impact heat may have on corn pollination as that stage of development gets underway. We are starting to hear some concerns over the possible impact of recent heat on the standability of the crop. Corn had ample soil moisture all spring and did not set the root system it normally does.

This can cause two issues later in the growing season. For one, the roots may not be able to pick up moisture if soils turn dry. Another concern is how stable the crop may be with insufficient roots to hold plants in place. These could easily become more of a topic as the growing season progresses.

Karl Setzer is Commodity Market Analyst for AgriVisor. His market commentary can be found on Twitter via @ksetzergrains

The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.