As expected, the United States has seen a decline in soybean demand with the start of the South American harvest season. While the United States is expected to see lower soybean exports as the South American harvest advances, sales are not going to totally stop. China will start taking large volumes of soybeans from South America, mainly Brazil, and this may force other importers to alternative suppliers. The question on future U.S. soybean sales is what volume we may see. The U.S. needs to sell 21.1 (million bu) mbu and export 31 mbu of soybeans per week to reach yearly expectations. Without Chinese demand these volumes may be hard to maintain.

The U.S. has been pressured all marketing year from Brazilian sales of their record corn crop that was harvested last year. While Brazil has now pulled its corn offers until their new crop harvest takes place, many buyers likely have enough coverage to bridge the gap until these bushels are available. The most watched of these is China, who was the recipient of 20 percent of the corn Brazil exported in December. Between this and ongoing corn exports from Ukraine, there is little need for U.S. corn at the present time. Even if the U.S. does see sales perk up, they will likely still fall short of current USDA expectations. Not only is export interest diminishing on corn, but so is domestic usage, mainly on ethanol. We are also seeing lackluster demand on wheat, both domestically and globally.

We are starting to see a shift in feed demand that is being noted in the global corn market as well. The spread between corn and wheat has narrowed to just 60 cents, which heavily favors wheat as a feed grain. This is being seen mostly in the Asian market right now where Japan, a leading importer of U.S. corn, has cut the amount of corn it is using in rations. The possibility of the United States seeing more of this is increasing as well. Not only can wheat reduce the amount of corn needed for feed, but soy meal as well as it is higher in protein. When combined with lower livestock numbers, this may lead to a decrease in both corn exports and feed usage estimates moving forward.

The competition the U.S. is seeing from Brazil is expected to increase, especially on soybeans. Trade continues to project a record Brazilian soybean crop this year with most analysts holding the crop near 152 million metric tons (mmt), a 25 mmt increase from last year’s crop. Analysts believe Brazilian yields and plantings are underestimated and the crop may be even larger, especially with ongoing favorable weather. Along with this higher production is coming elevated export projections. Brazilian soybean exports for this year are estimated at a record 97 mmt. This well above the previous record of 86.1 mmt set in the 2020/21 marketing year. Brazil is also expected to crush 51.5 mmt of soybeans this year.

Trade has been disappointed with the lack of Chinese demand since the country started to lift its COVID restrictions. Some had thought China would immediately increase their commodity buying but this has not happened. In fact, Chinese demand has actually decreased as COVID cases have increased considerably following the relaxing of travel regulations. It now appears China is trying to reach whole-herd immunity, which may take months to achieve. This is most disappointing for corn exporters as Brazil will likely be shipping new crop inventory by then. This lower demand may also be seen in beef and pork exports to start 2023.

The slow start to the soybean harvest in Brazil has been a market topic for several weeks, but this does not necessarily mean the soybean crop will be smaller than thought. What could end up being more of a factor for soybean production in Brazil is if rains persist and quality issues start to develop. There have been no cases of this yet, but trade will be closely monitoring progress in case it does and the world soybean supply is impacted.

What may be more of a case is the long-term impact of the slower start to Brazil’s harvest, especially if it delays the seeding of the second corn crop, the Safrinha crop. An estimated 1 percent of Brazil’s Safrinha has been planted compared to the 5.4 percent that was complete a year ago. In the leading production state of Mato Grasso, Safrinha planting has reached 2 percent compared to the normal 7 percent by this date. The optimum planting window for Safrinha yields closes after the third week in February. This does not mean planting will not happen after that date, but that yields may be less. The ongoing rains in Brazil have also delayed the application of crop protection products which may lead to elevated insect issues and plant disease as the year progresses.

The cattle on feed report for January was mostly as expected but verifies declining U.S. cattle numbers. As of Jan. 1, the U.S. had 11.68 million head of cattle on feed, 97 percent of the total from a year ago. This was a decrease of 355,000 head and also under the five-year average. Cattle placements in December totaled 1.8 million head and were 92 percent of December 2021. December marketings came in at 1.74 million head which was 6 percent less than last year.

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