Harvest is starting to gain momentum across the United States and as it does, more yield data is being collected. It is no surprise that yields are highly variable from region to region as weather conditions were mixed all growing season. Several regions of the United Sates experienced drought conditions this year, but others had mostly favorable growing conditions all season. As always, the question now is if the good areas will offset losses in the poor regions. The USDA is currently using yields of 173.8 bushels per acre on corn and 50.1 bushels an acre in balance sheets. Several analysts believe these will eventually be lowered, but this is not the opinion of all of those in the market, which has been weighing on futures market potential.

While a large portion of current market interest is on production, more is starting to be placed on demand, especially on corn. The USDA is currently projecting corn demand for the 2023/24 marketing year of 14.39 billion bu, an increase of 695 million bu from 2022/23. This is largely from an increase to the export forecast. The current export pace on corn does not support this larger demand number though, as exports currently trail their expected pace by over 40 percent. While there is time for this deficiency to correct, the longer it takes the less trade will believe the number.

Soybean demand is better than on corn. Export sales on soybeans were slow to start the year but have improved in recent weeks. The current sales pace on soybeans is a little over 20 percent behind expectations but there is less concern on soybean demand falling short of expectations. This is because U.S. soybean stocks to use is currently in a rationing position at 5.2 percent. We would currently need soybean demand to drop bu over 100 million bu to be bearish for the complex, and even then, it would still be at a minimal pipeline level.

As harvest activity increases across the United States, so does basis volatility. So far, this has been mostly to corn bids with reports of spot basis values widening up to 80 cents in just the past few sessions being noted. Soybean basis has also been under pressure with losses of 35 to 40 cents being posted. While harvest is a main reason for this, so are the logistic issues on U.S. rivers and slow movement to the gulf. Basis pressure may be limited though as farmers across the U.S. are expected to store as much inventory as possible this year. If this is accurate, buyers will need to post incentives to generate coverage.

While all interest in the United States is on harvest and demand, in South America all attention is on the planting of the next crops. Planting is now taking place in all South American countries, but trade is focused on Brazil and Argentina. The past few production seasons in South America have been impacted by the La Nina event that brought a long-standing drought. Weather is now being influenced by an El Nino and this brings much better growing conditions to South America. As a result, analysts have increased their South American production forecasts from last year. This is especially the case for Argentina where crop sizes are forecast to nearly double.

The Brazilian firm CONAB has released its initial projections for 2023/24 production. CONAB is putting Brazil’s soybean crop for this year at 162.4 million metric tons (mmt) compared to last year’s 154.6 mmt crop. An increase to acreage of 2.7 percent is credited for the largest crop. CONAB is predicting a Brazilian corn crop of 119.8 mmt this year, well below last year’s crop of 131.9 mmt. The firm believes corn plantings will decline 5 percent to cut into production. The USDA is currently using crops of 163 mmt on soybeans and 129 mmt of corn in balance sheets. Given the expanded window and early start to Brazil’s planting season these numbers may increase, especially on corn.

Trade is starting to show more interest in global wheat balance sheets. Several regions of the world that produce wheat need rain, including Argentina, India and Australia. The most interest right now is on Australia as the country tends to see less wheat production in El Nino influenced years. Australia has a lot of last year’s crop still to market though and this is tempering potential losses. Other regions of the world are raising production estimates though, including Russia which recently took their crop from 85 mmt to 91 mmt, but only raised their export forecast by 1.5 mmt. The question in the market is if this is actually Russia’s wheat or inventory that was taken from Ukraine and global production is unchanged.

The U.S. red meat production data for August has been released and showed a 3.2 percent decline in output from last year. Beef production declined 5.7 percent from August 2022 at 2.36 billion pounds. This was mainly from a 6.1 percent decline in slaughter numbers. Pork production decreased a slight 0.4 percent to 2.29 billion pounds. This came even with a 1.2 percent increase in hog slaughter. Weights played a major role in meat production as steer weights in August increased 3 pounds from last year while hog weights were down 4 pounds.

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