By Karl Setzer

 Nearly all attention in the domestic market at the present time is on harvest activity. Harvest has been slow to start this year but is finally gaining momentum. The start of harvest was hindered by ongoing rains that kept farmers out of fields. Now that harvest is progressing trade is gathering yield data to see how close the USDA and private forecasters have been in their estimates.

A concern that is has been ongoing since the start of this year’s harvest has been on soybean quality. Many soybean fields in the Delta received excessive rainfall and soybean quality has been affected. As a result, soybean exporters have been pushing for old crop sales in an effort to obtain high quality soybeans for blending. This has caused soybean basis to firm at a time of the year it normally widens with stocks building.

These quality concerns could have two significant impacts on the soy complex. The main one of these is if importers will use quality as a tool in price negotiation. Global soybean values remain elevated and with many buyers facing tough economic situations they will use any method possible to negotiate price. This will be done on sales already on the books as well as new purchases. The main one of these is China, well known for contract alterations. Domestically we may see crushers show concern over product quality, as meal and oil quality can easily be affected as well.

The United States is seeing mixed domestic demand as harvest commences. Feed and ethanol demand for corn are questionable as margins remain tight and consumer demand is not as great as hoped due to economic worries. Consumers in the United States are opting for cheaper products, especially on meats, which is impacting overall corn and feed grain demand. Soybean demand is better as crush margins remain very favorable. The United States’ leading competitor on soy products, Argentina, remains sluggish on marketing, which is keeping the door open for additional U.S. sales. These factors are why soybean basis remains firm while corn basis has started to soften in recent weeks.

The planting season is well underway in Brazil on corn and gaining momentum on soybeans. Sept. 15 is the first date soybean planting is allowed in Brazil as soils must sit idle for a period of time in an effort to control disease, mainly Asian Rust Fungus. So far, this has helped to control outbreaks.

As planting gets underway in Brazil a large amount of interest is on acreage. Soybean acreage in Brazil is expected to increase by 4 percent this year. Corn acreage is thought to be up 1-3 percent as well. If correct, this will make the sixteenth consecutive year of expansion to plantings in Brazil. How much expansion we actually see will depend heavily upon weather and input availability, same as in the United States.

We are also at the time when planting normally begins in Argentina, but farmers there are delaying the start of their corn seeding. There are thoughts that by delaying corn planting a few weeks the crop will miss the most intense part of the current La Nina weather system. This delayed planting not only benefited corn production in Argentina last year but Brazil as well.

The question when it comes to the current La Nina is how long it will last. Current models show it will still be in place as we start 2023. Forecasters believe there is a 54 percent chance the La Nina will still be impacting global weather in March, which is down from recent outlooks that indicated there was a 60 percent chance. If correct not only will the event impact South American crop production for a third consecutive year, but it will likely extend the drought in the Southwest United States as well. Not all regions of the world are negatively impacted by a La Nina though, as Australia will likely see another year of record-sized crops, primarily wheat.

Not only is the La Nina a factor in U.S. crop production, but in livestock as well. A large amount of liquidation has taken place in the U.S. cattle herd in the Southwest, and more is likely as pasture conditions have not improved in recent weeks. At the present time U.S. pasture on a whole is just 25 percent Good/Excellent, which is quite low as we head into the winter months. At the same time U.S. feed grains remain elevated which are causing cattle margins to shrink and even turn negative in some cases. Ongoing drought will likely cause this trend of fewer animals being fed continue.

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