The big story in last week’s trade was the release of the monthly supply and demand report. Surprisingly, the USDA once again released yield numbers that were higher than trade was expecting.

The USDA did lower the U.S. corn yield to 168.2 bushels per acre from the 169.5 that was expected in August. This puts total production at 13.8 billion bushels, as no adjustments were made to planted or harvested acres. We did see a reduction to corn demand of 25 million bushels from a lower ethanol figure, which wiped out much of the lower production figure.

Ending stocks on corn for the 2019/20 marketing year are now projected at a comfortable 2.19 billion bushels.

More changes were made to the soybean balance sheets. While acres were left unchanged, we did see a slight decrease in soybean yield to 47.9 bushels per acre from the 48.5 estimate in August. This puts production for this year at 3.63 billion bushels, just under the previous estimate for 3.68 billion, and above trade expectations.

New-crop soybean demand was reduced to 640 million bushels, though, which was under the average trade estimate. This was the result of old-crop exports being raised by 45 million bushels, along with the yield reduction.

No changes were made to overall domestic wheat numbers, which kept ending stocks at a comfortable 1.01 billion bushels.

We also saw alterations to the world numbers in the updated balance sheets. The global corn carryout figure decreased 1 million metric ton on the old-crop projection but increased an equal 1 million on new crop.

Soybean reserves dipped by roughly 2 million tons on both old and new crop. The global wheat reserves estimate was 1.5 million tons higher on old crop and 1 million ton lower on new crop.

Soybean futures took a substantial hit recently from news China will be sourcing more protein feeds from Russia. These include soybean meal, sunflower meal, and dried sugar beet pulp. While these products will be subject to testing at Chinese ports, they will further reduce the need for China to turn to U.S. soybean imports as the trade war shows no sign of being resolved.

The real question being asked when it comes to Chinese trade is how much business the U.S. may see even if the trade war ends. China has developed a comfort level with other commodity suppliers, mainly Brazil, and may continue to do business with them after the current trade dispute ends.

Given the decline in Chinese demand for soybeans, Brazil may be able to supply them with all needs. The U.S. may see elevated meat exports to China, though, as the country continues to cull hog herds to combat African swine fever.

The Chinese government has recently announced it will be making loans to business to help ward off the negativity from the trade dispute with the U.S. This generated ideas that the talks between the two sides are not as optimistic as reported, and China is preparing for an extended period without exports to the U.S.

While most attention when it comes to Brazilian competition in the world market is on soybeans, that country has taken away a large portion of U.S. corn export business as well. Data show that Brazilian corn exports for the marketing year total 20.7 million metric tons, compared to 7.5 million for the same period a year ago.

This pace is not expected to slow, with August corn exports on track to total a record 8.84 million tons. Yearly Brazilian corn exports could top the USDA projection of 37 million tons, at this pace.

One country that has stepped up and made several purchases of U.S. goods recently is Mexico. Mexico bought corn, soybeans, and soy meal from the United States last week. One reason for this is that U.S. values are quite competitive in the global market, and for soybeans, the U.S. is currently the most affordable for an import buyer.

Other reasons for Mexico to come to the U.S. for commodity needs are that Brazil is sending all its commodities to China, and Argentina is not making export sales due to political reasons – leaving the U.S. as the leading source of commodities.

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.