By Karl Setzer

The Safrinha harvest is quickly advancing in Brazil. A reported 50 percent of the crop has been harvested, twice the volume that was out a year ago. This rapid harvest pace has created logistic issues in Brazil and pressured the country’s offers. Corn out of Brazil is now being offered at a sharp discount to the U.S., but this is starting to narrow. It is questionable as to how much business the U.S. will see though, as Brazil is likely still going to be making exports when the U.S. harvest starts.

When it comes to U.S. exports, more interest is being placed on the soy complex. Combined U.S. soybean sales currently total 804 million bu (mbu), a record for this time of year. The previous forward contracting record on U.S. soybeans was 644 mbu, and last year the U.S. had 332 mbu of sales on the books. Nearly all these sales were made when concerns were building over the potential size of the South American crop. These fears have now subsided, and when combined with easing global demand, the complex has been pressured. Sales cancellations are also lessening the trade response to the high numbers.

We are starting to see a shift in the mindset of the soy complex, however. Up until now, there were thoughts the U.S. was over-selling its soybeans and old crop stocks may drop to a critical volume. Now that we have started to see previous sales canceled, trade is less worried. The question now is how many more of the 254 mbu of unshipped sales might be washed out of, as these sales are not being rolled to new crop, simply canceled.

There are indications in the market that the United States may see more export business on corn. One reason for this is that Argentina is not selling corn right now as they are holding inventory as a hedge against inflation. Brazil is also slower at selling corn as farmers believe futures will rebound following the recent sell-off. China has also indicated it will start taking corn from Brazil this year, which may open the door for U.S. sales in the future if availability becomes tight for current buyers.

Renewable fuel production in the United States continues to increase according to the latest industry report. Total U.S. renewable fuel production in the month of March was up 14 percent from February and a 26 percent increase from last year. Total renewable fuel production for the month came in at 121 million gallons, the second highest on record. 

Trade is closely monitoring the size and export of the Russian wheat crop. Officials in Russia have increased the size of the crop to a record at 88.8 million metric tons. Russia had been increasing its export tax on wheat and hit a record just short of $150.00/metric ton. This has dropped considerably though and is now at $85.00 per ton. Russia is also basing its tax values off the Ruble rather than the U.S. dollar, which is impacting all quotes. The question remains who will buy Russian wheat with much of the world placing sanctions on them until the Ukraine war ends, and possibly longer.

Basis values across the United States are becoming mixed. Soybean basis has softened at both interior and export channels as demand is starting to soften. Corn basis is firmer, mainly in the export market. This is because even though buyers are covering the majority of their needs with South American offers, they need product from the U.S. for blending. This is mainly with South American corn and a means of meeting strict import regulations from buyers. One of these is China though, who has eased their restrictions on Brazilian corn in an effort to make trade easier.

The sentiment of the U.S. farmer is rapidly declining and is now at its lowest point since October 2016. According to research from Purdue University and the CME group, the rising cost of production for most U.S. farmers is outweighing the higher-than-average commodity values. Not only are higher input costs a worry, but the simple availability of product is as well.

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