We are starting to see a change in market attitude, mainly in the soy complex. For the past several months there have been concerns the U.S. may cut its soybean reserves to a minimal volume. Carryout for the 2022/23 marketing year is already a minimal 215 million bu (mbu) and there had been thoughts it may dip even lower.

This mindset has started to change though, with several analysts now thinking ending stocks will be larger than currently predicted. This is from the drop in demand as Brazil is offering soybeans at a sizable discount to the U.S. News the U.S. was importing soybeans further lessened worries over declining reserves, even if the volume of purchases was low. Thoughts U.S. production will be up this year eased supply worries as well. The question now is if the managed money crowd will hang on to their long position in the complex with this change or start to liquidate their longs.

One of the main topics in recent trade has been the cancellation of U.S. corn sales to China and others. The question now is how much more of this activity could be expected. At the present time, the U.S. has unshipped old crop sales of 581.9 mbu on corn, 143.5 mbu on soybeans, and 91.7 mbu of wheat. Of these, the most cancellations are expected to corn and possibly soybeans. The price spread between the U.S. and South America on these commodities is widening, making their offers more attractive. Trade is starting to predict higher ending stocks of corn and soybeans in future balance sheets because of this.

Trade has been showing concern over the recent slowdown in U.S. export sales and now this same worry is being voiced over new crop sales. At the present time, the U.S. has export sales on the books of 100.1 million bu for corn, just 49 percent of last year’s sales at this time. New crop soybean sales total just 67.5 mbu, well below the 414.7 mbu from last year. In the past 10 years, there have only been two years with lower new crop commitments at this time, those being 2019 and 2020. New crop wheat bookings total just 47.5 mbu. There is plenty of time for these volumes to pick up, but the longer it takes, the more likely we see overall demand projections adjusted. This is especially the case with forecasts for elevated global production to give buyers more choices to source from.

Global economists are claiming the world will need to increase its use of genetically modified crops in order to satisfy a growing food demand. GMO crops have shown to be more resilient to adverse growing conditions and provide higher yields.

This is most noted in the United States where since 2000, USDA data shows corn yields have increased 38 percent and soybean yield is up 55 percent. According to the Food and Drug Administration, 92 percent of the U.S. corn and 94 percent of the soybean crop are GMO. The production of GMO crops has become more of a topic following Mexico’s announcement they would shy away from their imports, although Mexico has backed off on their initial stance.

The El Nino weather event continues to strengthen and increase its impact on global patterns. The most notable of these so far has been elevated rains in the Southern U.S. Conditions are also improving in South America, leading to elevated production estimates both this year and next. This is especially the case in Brazil where very little stress is being seen on the Safrinha crop. Not all regions of the world benefit from an El Nino though, as stress tends to be seen in Asia and Australia. The ultimate factor in how much impact we see from the event will be how strong its gets and how long it lasts.

Data out of China shows the country imported 7.26 million metric tons (mmt) of soybeans in April, a 10 percent reduction from April 2022. This was also 2 mmt less than trade was expecting. China recently changed its import guidelines to require a two-week quarantine which is delaying unload times. Chinese officials claim this is being done to make sure soybeans are safe, but it is also a means of controlling soybean flow and in turn supporting values. China believes unload times will improve in May and so will the volume of soybeans it imports. For the 2023 calendar year China has imported 30.2 mmt of soybeans, a year-to-year increase of 6.8 percent.

The May cattle on feed report came out with mostly as expected numbers. The total number of cattle on feed came in at 11.6 million head, 97 percent of a year ago. April placements totaled 1.748 million head which was down 4 percent from last year. Placement weights were lighter than in recent months which indicates they will need to be held longer. This can up feed grain demand but also tighten the U.S. beef supply, forcing packers to push for coverage now. Marketings in April came in at 1.7 million head which was down 10 percent from April 2022.

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