Final data has been tallied and as expected, China failed to reach its Phase 1 import obligations. Data indicates China imported $100 billion of U.S. products in 2020. This was just 58 percent of the agreed upon $173 billion. The question now is if China will be able to meet the second stage of the agreement that calls for even more imports. A bigger question may be if the United States can supply more products, especially commodities.

Economists do not believe we are seeing enough rationing in the U.S. soybean market. While soybean futures have rallied to their highest level since 2016, they trail other oilseed values in the global market. The main one is canola which is currently at its highest value in seven years. Palm and sun seed oils have also rallied to multi-year highs. This continues to push oilseed buyers to the United States, further tightening soybean supplies.

The other side of this rationing story is how much is needed at the present time. While U.S. soybean inventory is going to drop to a historically low level there are thoughts the bulk of our export sales are now behind us. Sales have decreased considerably in recent weeks and the harvest of the Brazilian crop is rapidly approaching. This is why soybean traders have been hesitant to push the soy values, but it could also be setting the complex up for elevated volatility.

Trade is starting to raise some questions on U.S. corn demand expectations. Corn sales are at a record pace for this time of the marketing year and export loadings are 201 million bu above the year ago pace. Even with these high loadings, we are still trailing the volume that is needed to reach the yearly USDA projection. We are also seeing doubt cast over the 5.05 billion bu ethanol and 5.7 billion bu feed demand estimates. The general thought is we may see ending stocks on corn increase as the marketing year progresses unless demand changes quickly.

While the stocks-to-use is not as tight on corn as soybeans, this could change quickly. The United States is the main supplier of corn to the global market and likely will remain so until June, but possibly longer. Ukraine has already lowered its corn export forecast by 6 million metric tons and sources are starting to lower the Argentine crop, some by 4 mmt from USDA estimates.

An unknown when it comes to global balance sheets in corn is the same as for soybeans, that being Chinese demand. Chinese corn demand continues to rise, and the country will need to either increase imports or elevate its domestic production. China may increase its corn production subsidies to those for soybeans in an effort to increase its domestic crop size. We may also see China work on improving corn yields as at the present time these are only 45 percent of the United States. Brazil has also announced the approval of foreign ownership of land in that country which is where China may look to expand its corn production.

This elevated demand for U.S. commodities has had an impact on processors, including livestock feeders. Sources from the U.S. poultry market claim feed costs will likely rebound considerably in 2021 from this year. Feed costs in 2020 were down 3.4 percent from 2019 as both corn and soybeans were weak to start the year. As a result, feed grain buyers have been hesitant to lock in 2021 needs, with some claiming they have no coverage at all and will only buy as needed.

Trade is also questioning the numbers of animals being fed in the United States. While the United States still has a large amount of cattle on feed, placements have started to decline. For the past two months cattle placements have been down 10 percent from last year. U.S. hog numbers are also 1 percent under a year ago. The combination of these two may simply offset any increase the United States expects to see to exports.

Global demand for wheat is on the rise. One indication of this was China selling all of the grain that was offered at auction last week. Not only was all of the wheat sold, but at a 7 percent higher value than the previous auction. Ukraine is also selling wheat for export at a higher value, with offers up $3 per metric ton in the past week. The largest increase has been to Russian wheat which is up $23/metric ton. These higher values will likely bring the United States more export demand than currently projected.

The supporting factor for these elevated wheat values is export restrictions. The leading one is Russia which is indicating it may extend its high tax rates on exports into the next marketing year. Ukraine is also considering taxes that would limit sales. Australia has plenty of wheat to export but port space is limiting the ability to make timely shipments. This comes as the global demand for wheat is rising as more countries want to ensure adequate food supplies, including China, which has doubled its imports in the past year.

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