By Karl Setzer

Trade is starting to make projections on what the developments in the Black Sea mean for the world wheat balance sheets. At the present time the global stocks-to-use on wheat is projected at 28.5 percent, which is only slightly less than a year ago. Half of this wheat is in China though and is not available for global use. If we remove China, the world balance sheets on wheat tighten to their lowest level since 2007. If we then take the Black Sea out of the world supply the global stocks-to-use drops to its lowest level on record at just 12.9 percent.

The same scenario is being considered in the world corn balance sheets. The world corn balance sheets for this year are nearly unchanged from a year ago. If we take out China and the Black Sea, global corn reserves fall to 8.3 percent. While this is just under last year’s 8.5 percent stocks-to-use, it is the lowest volume on record. There is heavy debate on the world corn balance sheets though as several forecasters have increased their Brazilian crop estimates as recent rains have been quite favorable for the crop.

The world soybean needs in the spot market are once again being mostly satisfied with new crop inventory out of Brazil. The leading one of these importers is China who has taken in 3.5 million metric tons (mmt) of soybeans from Brazil so far this calendar year. This is a large 241 percent more than the same period a year ago, according to data from Reuters, as heavy rains slowed last year’s start to the harvest in Brazil. The United States has shipped more soybeans to China than Brazil this year at 10.04 mmt, but this is a 16 percent decline on the year. The lack of a binding trade agreement is limiting China’s imports of all U.S. products, but the drought in Brazil may elevate late season buying from the U.S.

Even though it has faded from the daily headlines, the La Nina weather even is still very much intact. This is now more of an issue for the United States and the primary reason we continue to see drought in Southern States. Some models now indicate that the event could last through the winter an into next year. This may be more of an issue for South America, particularly Argentina. This would be the 1st time in the past 20 years that Argentina would be impacted by a La Nina for three consecutive years.

Analysts are starting to release their estimates for the planting intentions report that will be released on March 31st. So far estimates are for an increase in wheat and soybean plantings of 2 million each from last year. Corn plantings are expected to decline 1 million from a year ago. These numbers are in line with what the USDA projected in the February Ag Outlook Forum, but if we are going to see plantings this high it will take nearly perfect spring planting conditions.

This year’s soybean production season in Brazil is still taking place but we are already starting to see projections for next year’s crop potential. The most interest right now is on plantings and if we will see expansion like we have for the past several years. Economists believe Brazilian farmers will in fact continue to elevate their soybean plantings, but at a slower rate due to rising input costs. Brazil typically expands its soybean plantings from 2.5 to 5 million acres per year, but this year the increase may be just half of that.

The food versus fuel debate is again starting to build in the commodity market. This is not uncommon when food values inflate, but the all-around inflation we are seeing at this time is giving the debate more attention. Another difference is that the current fuel or food debate is on the global stage, not just in the United States. Many biofuel blenders around the world are looking at cutting or suspending blend rates to lower food costs for consumers. While this can be effective, it can drive fuel costs higher in return.

Even though Brazil is still in the midst of this year’s growing season we are already seeing estimates for next year’s soybean production. Input supplies in Brazil are reported as lower than usual and given the issues in the Black Sea, some of these may struggle to build. Typically, Brazil expands its soybean plantings 2-5 percent annually, but a lack of inputs may limit expansion this coming year. This does not necessarily mean Brazil will produce a smaller soybean crop though, as a return to normal weather may be just as beneficial to crop size as expanded acreage.

Chinese meat import data from the United States for February has been released. In the month, China imported 160,000 metric tons of US beef, up 10,000 metric tons from January, but a 3.4 percent reduction from February 2021. China bought 130,000 metric tons of U.S. pork in the month, down 20,000 metric tons from January and well below the 215,000 metric tons that were booked a year ago. For the first two months of the calendar year, Chinese pork purchases from the United States were down 60.4 percent from the same period in 2021.

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named. This is not independent research and is provided as a service. As such, this is considered a solicitation.