We are starting to see a shift in the global commodity market from being one that favored sellers to one that favors buyers, or what is referred to as a “buyer’s market.” This is more of a case on corn and soybeans where global inventories are rising and expected to be even larger in the 2023/24 marketing year. This build in inventory allows buyers to be choosier in when and where they source needs from and favors the hand to mouth import buying we have seen in recent weeks. The basis weakness we have seen in the global markets is offering additional benefits to import buyers as well as interior processors in many countries. This shift in attitude is making it more difficult to pin down export demand. When we add in the volatility that currency valuations are generating it makes predicting global trade even more difficult.

There are several other factors that are impacting export trade as well, with shipping costs and geopolitical differences being primary ones. When it comes to global trade and demand, the U.S. market is trying to determine how much business we will see. It is a well-known fact that U.S. has lost some of its share of global trade, with most going to South America. Crops in South America are expected to be much larger this year to give importers even more product, and further narrow the window for U.S. sales.

It is now thought the U.S. may have half the window to make exports in than it had just a few years ago, and this will keep narrowing as global production rises.

There is a shift in the soy complex from attention being focused on this year’s production in the United States to more interest on the upcoming crops in South America. At the present time, estimates on the U.S. soybean crop range from 4.1 to 4.3 million bu. Brazil just harvested a 156 million metric ton (mmt) soybean crop but a much larger crop for next year is anticipated. The USDA is currently predicting a 2023/24 Brazil soybean crop of 163 mmt, but private groups have it larger, with several between 166 to 171 mmt. Even if the United States produces a smaller soybean crop this year the window for needs to cover before the next Brazilian crop is shrinking, and so will demand for our offers in the global market.

The USDA is currently projecting China’s soybean imports for 2023 at 99 mmt, which some analysts feel is too low. These individuals believe China’s yearly imports will be closer to 106 mmt given recent import volumes. Import data shows China took in 9.73 mmt of soybeans in July, an increase of 23.5 percent from last July. Year to date Chinese imports stand at 62.3 mmt, up 15 percent from a year ago. Many of these soybeans originated from Brazil which is not surprising. Brazil’s record soybean crop and price advantage over the U.S. make them the source of choice for soybean imports as these are allowing China’s crush margins to remain positive. The elevated value on U.S. soybeans would put China’s crush margins in negative territory.

World food values made a slight increase in the month of July, ending several months of decreases on values. Food costs increased 1.3 percent from June to July, mainly from the spike in world vegetable oil values. Vegetable oil costs increased 12.1 percent in July, the first increase in seven months. Wheat costs also increased 1.6 percent in the month, the first rise in nine months. These were partially offset by lower values on beef and dairy products. World food costs are still down 11.8 percent from last year.

Data from the American Farm Bureau Federation shows U.S. land values spiked higher in 2022. According to the federation, the national average farmland value was $4,080.00 in 2022, a 7.4 percent increase from 2021. This was the second largest increase since data started to be collected in 1997. The greatest increase was seen in Kansas where land values appreciated 16 percent. This increase was prior to the latest round of inflation in ag costs and higher interest rates which may temper 2023 gains.

Weather conditions across the United States are starting to have less of an impact on daily price discovery. Many areas of the U.S. have received rains recently and more are now reporting they have adequate soil moisture to finish out their crops. This does not mean weather will not impact price discovery, but that market reaction to forecasts will have less of an impact. This has caused risk premium to be removed from the market and is a source of recent price pressure.

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