We are starting to see more harvest activity in the United States as weather permits. As always, the initial interest is on yield when this happens. To nobody’s surprise, early yields in the United States are variable. While no specific numbers have been given, reports ranger from “better than expected but below a year ago” to “best yields ever.” These reports indicate it may be well after harvest before accurate production data can be formed.

While harvest is starting in the U.S., planting is progressing in South America. The most interest right now is on Brazil where soybean planting has reached 21 percent. Analysts are pointing out how this is below last year’s pace of 34 percent complete at this date, but it is right at the five-year average. Given forecasts for rains to continue across Brazil this number will continue to increase.

The question when it comes to Brazil’s planting is what the slower pace than a year ago may have on the Safrinha crop. This is Brazil’s second corn crop and is where the record production the country had a year ago came from. One of the main reasons for last year’s record Safrinha crop was that it fully matured before the end of the rainy season, which usually stops in May. If corn planting is slower this year the crop could run out of moisture before harvested, reducing final yields.

Trade relations between the U.S. and China continue to be monitored for clarification on progress. It now appears as though the trade war has not ended, but rather both sides have agreed to not escalate tensions any further. The big hold up remains tariffs, and how China is demanding these be removed before agreeing to any proposal. Even with these tariffs in place we are seeing trade talk between the two parties, which is a positive sign.

There is still concern over the lack of Chinese business since the announcement that a tentative trade deal with the U.S. had been reached. China had instead been doing business with Brazil, booking a reported eight vessels of soybeans in the past week. This is thought to total 480,000 metric tons of soybeans. While it is unusual for China to source soybeans from Brazil at this time of the year, the currency spread between Brazil and the U.S. favors them as a soybean source.

When it comes to Chinese soybean demand, imports on a whole are down. In the month of September, China imported 13.5 percent fewer soybeans than in September of 2018. This is a direct result of ongoing African Swine Fever losses in hog production. China is still buying soybeans for reserve though, which is generating demand.

Economic data shows the trade war between the U.S. and China is taking a toll on China. According to research from MidCo Commodities, consumer price inflation in China is up three percent from a year ago and has reached a six-year high. This is a direct result of elevated food prices which have risen 11.2 percent in the past year. The majority of this is stemming from a 69 percent rise in pork values, the fastest rise in the past 12 years.

Updated numbers on Chinese hog losses vary considerably from previous totals. According to the Chinese National Bureau of Statistics, Chinese hog losses in the first nine months of 2019 from African Swine Fever totaled 28.5 percent of production. This is a considerable difference from the country’s Ag Ministry claim that 41 percent of hogs have been lost. This lower number would answer the question as to why China has been importing less pork than expected.

We are also hearing more opinions on when China may start to rebuild its hog herd. According to sources in the country, China will start to see a rebound in hog production in early 2020. This seems optimistic as African Swine Fever is still spreading through parts of the country. China is importing hogs to try and build herd though, which may help with the quicker rebound in production.

Reports of a potential tax change in Argentina could greatly impact their soybean and soymeal exports. Argentina has reduced their export taxes on these products in an effort to gain more of a world market share. By doing so, tax revenue has dropped considerably in Argentina, and the country is starting to feel a fiscal strain. Now the country may raise these taxes which would elevate product values to a point where the U.S. would become much more competitive in the global market.

We are already starting to see private estimates released for the 2020 U.S. production year’s acreage. It is believed that the U.S. will plant 95.3 million corn acres this coming year, a 5.9 percent increase from last year. Soybean acres are forecast to rise 12 percent to an 85.3 million total. If all other factors hold steady, including yield, this would leave the U.S. with plentiful ending stocks next year. For corn, the carryout could quickly become burdensome if we do not see a build in demand.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com.