There are currently two major factors in grain market price discovery: harvest in the United States and planting in South America. In the United States, we are seeing an active harvest pace with progress at or ahead of historical averages. Very little of this new crop inventory has made its way into the supply line though as farmers are opting to store as much new crop inventory as possible this year. Hope for a rebound in market values is the primary reason for this. The current market outlook supports this strategy on soybeans, but not as much on corn given the ample 14.7 percent stocks to use there is on that grain. On soybeans this is just 5.2 percent and warrants addition risk premium and price support.

With the advancing U.S. harvest, we are starting to receive better production data. The USDA is currently using yields of 173 bushels per acre on corn and 49.6 bushels per acre on soybeans. As the harvest progresses, several analysts feel these numbers could easily increase, and this is capping our current market potential.

Even though the U.S. is still harvesting this year’s corn and soybean crops, a few groups have started to release acreage estimates on next spring’s plantings. These groups are predicting a decrease in corn acres and an increase in soybeans. The primary factor for this shift is the potential for higher soybean values given the tight stocks to use on that commodity. A lower cost of production is also favoring soybean planting over corn. While it is far too soon to accurately predict acreage, these forecasts will start to be more of a market factor once harvest wraps up and farmers start locking in new crop inputs.

In South America, all attention is on their planting season. The overall planting paces are near normal in South America, but there are some regions of concern. The most notable is in Argentina, where there remain drought conditions from the La Nina weather pattern. While we are now in an El Nino scenario, rains have been slow to return. As a result, we may see smaller Argentine crops than the USDA is projecting. At the same time this may simply delay crop development and make the crop later than normal.

Planting is more advanced in Brazil, but even there we are seeing disruptions. Active seeding is taking place in several regions of Brazil, but in others heavy rainfalls have slowed progress. We are also hearing reports that reseeding will be needed on some of the first corn crop. This is not a huge volume though and unlikely to impact balance sheets. Trade is now trying to determine when soybean harvest will start in Brazil and models indicate by mid-December. This will put Brazil soybeans on the market nearly a month sooner than usual. It is also likely that Brazil will still be exporting old crop stocks then as well.

One of the major hindrances for the commodity market recently has been the global economy. Import buyers are limiting their purchases to necessary commodities, and nearly all are just covering immediate needs rather than buying for reserves. Wide currency valuation differences and high interest rates are the leading causes of slowing demand. Unstable economies are also a factor, especially in the world’s leading importer, China. This slowing demand has combined with elevated global production outlooks to pressure commodity values, even in the U.S., where inventories of corn, soybeans and wheat are at tighter than normal levels.

There are indicators that the global economy will soon start to improve, however. One of these is an outlook from the International Monetary Fund, which is predicting a softening global inflation. The IMF is estimating inflation to hold at 6.9 percent for the remainder of 2023 and then decrease to 5.8 percent in 2024. Core inflation is projected to remain at 6.3 percent then recede to 5.3 percent for 2024. Core inflation is the cost of goods not including food or energy products. The IMF is forecasting world GDP growth at 3 percent for 2023, but a dip to 2.9 percent for 2024.

The October Cattle on Feed report was more bearish than trade was expecting. There were 11.6 million head of cattle on feed in the United States on Oct. 1, 1 percent more than a year ago. This was the second highest on feed number for that date since data started to be recorded in 1996. This was broken down with 6.95 million steers and 4.64 million heifers. September placements were well above trade estimates at 2.15 million head, 6 percent more than a year ago and 8 percent higher than forecast. September marketings totaled 1.66 million head, which was down 11 percent from last September and 4 percent below expectations.

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