The US drought continues to intensify. At the present time 70 percent of the U.S. corn production area is in drought, up 30 percent in the past month. The U.S. soybean production region is 71 percent in drought, up 33 percent from the end of September. An estimated 74 percent of the U.S. winter wheat region is in drought, up 10 percent from last month, but this region has suffered from drought for several months now. Trade is hopeful that an end of the La Nina weather event will remedy these deficits.

The most concern over drought at the present time is on the U.S. Plains, where drought is starting to impact fertilizer applications. As stated, nearly three-quarters of the Plains and Wheat Belt are currently suffering from drought. This is the highest level in drought since 2000. Some farmers are now starting to second guess their winter wheat plantings as they want to see soil moisture build before seeding. We are also seeing farmers hold back on their fertilizer applications as it is too dry for activation. Farmer are also holding off on anhydrous ammonia applications in some regions as conditions are too dry for the product to stay in the soil.

While trade continues to predict record crops for Brazil, there is less certainty on the Argentine crops, mainly on corn. The USDA is currently predicting a 55 million metric ton corn crop for Argentina, but some analysts are starting to doubt this as drought continues in the country. Just 17 percent of the Argentine corn crop has been seeded which is also concerning for some analysts.

Argentina has started to split is corn plantings though, same as Brazil has done in recent years. The remainder of Argentina’s corn crop will be planted in December and January when the La Nina is forecast to break down. This could easily give Argentina the crop that is being forecast, and potentially more if weather cooperates.

For the past several months trade has been monitoring Chinese import demand, and while still a very important factor in price discovery, more attention is now being placed on Mexico. Mexican officials continue to move toward their non-GMO corn policy they plan to have in place by 2024. Thoughts are this may cut U.S. imports by 50 percent as only feed grain corn will be purchased. Mexico is a leading U.S. corn export destination, and this loss of business would have a significant impact on our balance sheets. Mexico has also announced they want to start buying more corn directly from farmers in both the United States and South America.

The analytical firm Oilworld has updated its projections for the 2022/23 world soybean balance sheets. Oilworld now projects this year’s world soybean crop at 390.2 million metric tons (mmt), well above the 355.9 mmt that were produced in 2021/22. This is mainly from the record crop out of South America that is being forecast. Global soybean crush is estimated at 324.5 mmt, also up from the 318.6 mmt from last year. Oilworld is predicting world soybean carryout of 103.1 mmt for 2022/23, well above the 89.1 mmt at the end of last year, and a level that is record large.

Concerns are starting to build over the slowing export pace the United States is seeing on beef. U.S. beef sales started the calendar year very high with bookings up 19 percent from the previous year. This was led by China whose purchases were up 15 percent from January 2021. South Korea was also a major buyer with bookings up 39 percent. By the end of June, the increase in U.S. beef exports for the year were only up 8 percent, although still record high. A stronger U.S. dollar and ongoing COVID restrictions in China cut demand, but the greatest deterrent to beef demand is economic worries and cheaper alternative meats including pork and poultry. Given these ongoing factors, beef demand could easily continue to decline into 2023.

When it comes to U.S. exports, more comparisons are being made with overall projections. Cumulative corn sales total 570 mbu, down 53 percent from last year. The USDA is only predicting a decline in exports of 13 percent from last year. Year to date soybean exports total 1.187 bbu, equal to last year, while a 5 percent decline in sales is being projected by the USDA. Cumulative wheat sales are the lowest in 15 years at 447 mbu. This total is 6 percent behind last year. 

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