Harvest is still well underway in the United States, but we are already starting to see more interest in what crops may be produced next year. The most interest on this topic is on acres and if we will seed as many as we did this year and to what crop. Prevent plant acres were high in the United States this year and this is not expected to be the case next year. We are already seeing analysts predict higher plantings of corn and soybeans especially, with corn acres anticipated to increase by 5 million from this year.

The main reason for the projected increase to corn acres is its price in comparison to soybeans. At the present time, the December 2023 corn and November 2023 soybean contracts have a price ratio of 2.1:1, meaning it takes just 2.1 bushels of corn to equal the value of 1 bushel of soybeans. This is historically narrow and would indicate higher corn acreage.

While this increase to corn production is possible it is questionable at this time. The number one reason is input costs which remain quite high on corn. This is especially the case on nitrogen-based fertilizers, which are heavily influenced by the energy market. Fertilizer values have backed off from their recent highs, but so have corn futures, and returns are still not as attractive as farmers would like to see.

One factor trade continues to keep a very close eye on is the drought that has impacted several regions of the United States. Most notably this is affecting the Plains where non-irrigated production suffered this year. If timely rains do not start to fall next spring, we may not see farmers as eager to plant corn in that region as soybeans and wheat tend to be more drought tolerant.

The current drought in the United States has had a greater impact for the immediate market, mainly on river transportation. Water levels on all U.S. rivers have dropped and made navigation very difficult. Barge drafts, which is a measure of how far they can be in the water, has recently been reduced to just eight feet. This means barges can only carry roughly half of their normal capacity. This has made shipping very difficult. As a result, gulf supplies of commodities have dropped considerably and turned several import buyers away from the United States as a reliable source for needs.

While we are seeing more interest on U.S. grain production, demand is starting to become much more of a factor in daily price discovery. Soybean sales at the present time are up 10 percent on the year but showing signs of slowing. The ongoing competition from South America and uncertain demand are slowing U.S. sales. If next year’s South American production is as large as some forecasters believe it will reduce our sales even more.

The greatest concern on demand right now is on corn as cumulative sales are down 50 percent on the year. Brazil produced a 30 percent larger corn crop this year than last and this is where most importers are sourcing coverage from. The primary hindrance for U.S. exports on a whole is the strength in the U.S. dollar. This is making U.S. corn more expensive to an importer, even if offers seem competitive. The concern in the market now is if buyers will return to the United States for needs prior to the next crop being harvested in South America this winter.

Planting season is well underway in South America, and in Brazil, conditions are near perfect. This is causing a sizable increase in crop estimates as not only is weather more favorable, but farmers are also expected to seed more acres. The current Brazilian crop estimates are for 150 million metric tons of soybeans and 120 million metric tons of corn. These would be increases from this year’s crop of 25 million tons on soybeans and 5 million tons for corn. Some analysts believe the soybean crop in Brazil will be larger though and total closer to 160 million metric tons. If accurate, this will greatly reduce demand for U.S. offers in the world market.

One of the greatest unknowns when it comes to not just South American crop production but that of the world is if the current La Nina will last. The global commodity market has dealt with a La Nina for the last three years and is a primary reason for poor crops in parts of South America as well as the U.S. Plains. 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.