The pressure that Brazilian production has placed on the US export market is unlikely to subside anytime soon. Sources in Brazil believe their 2023/24 corn crop will be just as large as this year. Officials in Brazil are also expecting a much larger soybean crop next year with production forecast at 166 million metric tons (mmt) compared to 156 million tons this year. A 4.5% forecasted increase in soybean plantings and more favorable weather outlooks are behind the higher crop estimates. 

Not only is Brazil expecting larger crops in the 2023/24 marketing year but so is Argentina. The attaché in Argentina believes a return to favorable weather with the La Nina event ending will allow production to rebound. It is thought the next Argentine corn crop will total 54 mmt compared to 34 mmt this year. Argentine soybean production is forecast to hit 48 mmt next year, well above the 21 mmt crop from this year. The combination of these larger crops will add 20 mmt of corn and 34 mmt of soybeans to the global supply and undoubtedly narrow the United States’ share of global trade. 

These crop estimates are causing many of the world’s leading importers to wait to extend coverage. As a result, US export sales for the 2023/24 marketing year are historically low and well behind last year’s volumes. New crop corn sales currently total just 192 million bu, a 29% decline on the year. New crop soybean bookings total 201 million bu, a large 62% less than a year ago. While there is plenty of time to correct these deficiencies, they are keeping a negative tone over the market.

We are starting to see a shift in importer attitude that is affecting all US exports. Importers have shifted back to only extending their coverage by small amounts rather than covering large chucks of projected usage. One reason for this is price as commodity values have risen in recent weeks making it costly to buy several vessels at once. The increase in global interest rates and rebound in the US dollar are also limiting what an importer can buy at one time. 

Another reason for the change in importer attitude is that commodity supplies are becoming more perpetual. This is from the larger crops out of South America and expectations that production will increase even more. This eases the need to buy large amounts at certain times of the year. This change in market outlooks has been more of an issue for the US and will continue to shrink our share of the global market. 

Brazil has been an increasing source of competition for the US in the global market and newly released data indicates this is not going to change anytime soon. Officials in Brazil project that by the 2032/33 marketing year the country will be producing a total of 390 mmt of commodities including corn, soybeans, and wheat. This is an increase of 24% from the current production in Brazil, or an additional 75.5 mmt. This is mainly from the development of degraded pasture. There are currently 36.5 million acres of this pasture that can easily shift into crop production. The bulk of this will be to soybeans where a 78% increase in crop size is forecast. On a whole, Brazil has nearly 375 million acres of land for ag development but logistics make it difficult at this time. 

Trade is now trying to determine how much grain flow out of Ukraine may be lost this year. In the 2022/23 marketing year Ukraine exported 28 mmt of corn. For the 2023/24 marketing year this is expected to decline to just 19.5 mmt. Wheat exports two years ago totaled 18.8 mmt and this year they declined to 16.8 mmt. In the 2023/24 Ukraine is forecast to export just 10.5 mmt of wheat. The concern is that even these numbers may be too high given recent escalations to fighting and how Ukraine may be held to only using land routes. 

Chinese officials have reported that their sow herd has increased 1% from May to June. This put the country’s sow herd at 43 million head. China also reported a total hog herd of 435 million head which is a year-to-year increase of 1.1%. This surprised trade as China has been reporting contraction in the hog industry due to low returns and consumer demand that is stagnant. This data suggest Chinese pork production will increase as the year progresses rather than decrease. China is starting to rotate its pork reserves and the potential for elevated domestic production is keeping their imports at minimal volumes. 

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.