By Karl Setzer

 Several analysts have revised their Brazilian soybean production estimates recently, but now we are seeing alterations to the country’s soybean export forecast. The firm Safras now puts Brazilian soybean exports for 2022 at 74.5 million metric tons (mmt). This is down 3.5 mmt from the firm’s previous estimate, and well below the 86.1 mmt it exported in 2021. This will leave a large void in the world market that the United States may be able to at least partially fill.

Trade is also closely monitoring our corn export potential for the remainder of the marketing year. Initially it was expected that the United States would see elevated corn demand toward the end of the summer months, but now this is being questioned. Argentina is offering corn for export at a sharp discount to the United States through the end of August. In just a few weeks we also start to see corn flowing out of Brazil, which is also under the U.S. market. This may leave little if any room for late summer U.S. business.

The United States is currently seeing the most export competition on wheat. The European Union is presently offering wheat for export at a sizable $100.00 per ton discount to the United States. Most buyers have less freight from the EU than the United States, which widens this spread even more. Even with the loss of Ukraine wheat in the global market right now, this differential is keeping demand for U.S. wheat at a minimal volume.

We are starting to see a difference in opinion when it comes to U.S. soybean demand for crush. While crush demand has been strong this year, it may be difficult to reach the current USDA projection for the marketing year of 2.215 billion bu given the recent usage pace.

According to the latest NOPA crush data, we will need to see a record 173 million bu (mbu) of soybeans per month for the remainder of the year to reach this level. Last year crush averaged 157.5 mbu per month over this period, and the previous record was 168.7 mbu and that was with no down time for maintenance. While NOPA members only account for 95 percent of total U.S. crush capacity, this still brings overall consumption into question.

One benefit the U.S. soybean market has had in recent weeks is a lack of competition in the global market. Brazil is still making exports of previously booked sales, but so far, we are seeing limited sales from Argentina. So far, Argentine farmers have only marketed an estimated 18 percent of this year’s production. It is not uncommon to see limited sales throughout the year in Argentina as farmers use soybeans as a hedge again currency fluctuations, same as in many other countries. Given the high revenue soybeans are currently generating, sales are even more limited than normal.

The harvest of the second corn crop in Brazil, the Safrinha crop, is just getting underway. So far harvest is confined to the northern regions of the country where the worst drought damage has taken place. We are not receiving yield data on the crop, but it is expected to improve as harvest advances. As harvest moves south it will get into regions where growing conditions were much more favorable. This is the primary reason we are seeing wide ranges in Brazil corn production, with numbers as low at 107 mmt and as high as 116 mmt.

Most U.S. processors are still showing positive margins, but concerns are starting to be voiced in the livestock industry. Feeder cattle values remain elevated, and when combined with high feed costs, there are thoughts we will see lower placements in the future. The U.S. beef inventory has been steadily building in recent months, but the combination of these factors has industry officials worried about future economics. As a result, we are starting to see strength in live cattle futures to keep lots full.

When it comes to livestock, trade is also closely monitoring slaughter numbers as rates remain very high. Cattle slaughter for the week is up 23.3 percent from the same week a year ago. Hog slaughter is up 11.8 percent on the year. As mentioned, trade is watching these rates very closely to see if herds are being liquidated due to poor returns.

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