By Karl Setzer

 Some analysts are already starting to adjust their production estimates due to current U.S. weather conditions, mainly on corn. Some of these have reduced their potential corn yield estimate by 6 bushels per acre from current weather. Planted acres have also been lowered, which will further reduce new crop corn production. This is already causing trade to show concern on new crop corn balance sheets.

The delays we are seeing in the U.S. planting season are having other impacts on the market. For one, it is generating ideas that the crops will mature under stressful conditions as they may be impacted by late summer heat. If plantings are delayed much more, they will likely need to be dried next fall and increase demand for energy products. One benefit from the staggered plantings is they may alleviate fall congestion at delivery terminals and prevent fall basis from widening.

Not only is spring planting delayed in the United States, but in Ukraine as well, albeit for very different reasons. Farmers in Ukraine have now seeded just 25 percent of their intended spring grain acres. Not only are logistic and input shortages a hindrance in Ukraine, but many farmers report finding mines in their fields. Trade remains uncertain on how much actual planting we will see in Ukraine this year, but before long, it may be too late to seed their crops.

It is well known that the Ukrainian infrastructure has been damaged from the war with Russia, but we are now getting a better idea of actual structural losses. This is becoming a major concern, especially for Ukraine’s corn farmers. According to the Ukrainian group Agro Consult, 5 percent of the country’s corn facilities are damaged, which may prevent the harvest of some fields with standing crops. The group also claims another 15 percent of Ukraine’s storage facilities cannot be reached due to damage to roads and rail lines.

Weather has turned dry in Brazil in recent weeks and there are reports this is causing significant damage to the country’s Safrinha crop, which is the second corn crop of the year. Some analysts have made sizable reductions to Brazil’s total corn production as a result, with some no more than 108 million metric tons (mmt) compared to the current USDA projection of 116 mmt. There are other scouts in Brazil who believe the crop is actually going to be larger though, as the bulk of the Safrinha crop is not seeing stress, and acres are currently underestimated.

We are also starting to see more interest in Argentine acres, with an emphasis on new crop. Reports out of Argentina indicate the country will see an increase in soybean plantings next year. This is a reversal of the contraction we have seen in Argentine soybean production in recent years as farmers opted to seed corn as it carries a lower export tax. Now it appears as though fertilizer costs are at a point where farmers are further ahead to again seed soybeans. A need to rotate acres is also a likely reason for the elevated soybean plantings.

Buyers across the interior U.S. market continue to push for deliveries of both corn and soybeans. This is from the high margins that can currently be locked in on both ethanol and soy products. In some cases, soy crushers are locking in $2 per bushel and ethanol plants can lock in 20 to 40 cents per bushel. Livestock margins are not as strong, and this is why feeders are not pushing as hard for coverage.

Much of the focus in the U.S. export program has shifted to new crop as sales of next year’s corn and soybeans are both well ahead of last year. The United States already has forward sales of 165.5 million bu (mbu) of corn. Forward soybean sales total 394.2 mbu, up 62 percent from last year. The question now is if sales are front-loaded, or the United States is going to see more demand due to smaller crops in other countries. Forward sales of wheat are less friendly, with new crop bookings down 14 percent.

Trade is also monitoring cumulative sales of beef and pork where numbers remain mixed. Beef sales are still on a record pace with 288,700 metric tons. This is up 2.9 percent from last year at this time. Pork sales total 469,500 metric tons, a 27 percent decrease on the year. This slow demand pace on pork remains the result of the loss of Chinese trade.

Reports out of China show that the country’s sow herd continues to contract. At the end of March China reported having 41.85 million sows, a 3.3 percent reduction from February. China’s total hog herd was down 5.9 percent from the previous month at 422.5 million. Poor margins have caused Chinese hog feeders to liquidate herds, but now margins are starting to improve, and culling is likely coming to an end.

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