One of the takeaways from the latest U.S. grain inventory report that may start to change the overall mindset of the market is how much demand increased from June through August this year from last. Over this span, corn usage was up 22 percent, soybeans increased 18 percent, and wheat was 11 percent greater. This elevated demand means the U.S. needs to produce larger crops to keep stocks to use from falling into rationing positions. This may be closer than thought, as current balance sheets indicate yield loss as little as 3 bushels of corn and 2 bushels of soybeans from current USDA predictions and we would be at that point.

One of the main stories in recent trade has been the ongoing string of U.S. export sales, especially on corn. There are concerns that a rally in corn values will halt this demand, but the fact the U.S. is the only source with exportable corn is tempering a negative reaction. One of these is Brazil, where heavy domestic demand has cut the country’s exports 30.5 percent from last year. This comes at a time when Brazil has typically been a main supplier to the world market. This loss of exports has also removed a reported 12 percent in the country’s revenue.

Brazilian officials are revising their corn export forecast and expect it to continue to trend lower. Through the end of September, Brazil had cumulative corn exports of 26.3 mmt. This is 15 mmt below last year’s export pace by this time. Last year, Brazil managed to export another 12 mmt by the end of the year. This year, sources in the country expect to see little if any additional corn sales moving forward, leaving a large hole in the global market for the United States to help fill.

The main reason for the decline in Brazil corn exports is elevated domestic consumption. Much of this is for ethanol as Brazil transitions away from sugar-based production to corn as a raw stock. Brazil’s corn has also been needed to help cover the smaller crops out of Argentina in recent years.

Not only is low water an issue for crop production, but also for river logistics in South America, and another reason behind sluggish exports. Several of South America’s main rivers’ water levels have dropped low enough that they are now not navigable. This means more shipments to export terminals are taking place by truck, which raises costs. This is why some of northern Brazil’s terminals have opted to pull their export offers rather than sell at a loss. This has already started to favor U.S. exports and likely will for the next several weeks.

Data from a recent poll shows a dip in U.S. farmer sentiment at the end of summer. According to collected data, farmers claim ongoing depressed commodity values and elevated input costs continue to paint a bleak financial outlook. This has dropped farmer sentiment to its lowest level in the past eight years. The data collected for this study was compiled in early September though, and since then, commodity values have improved. We have also seen a cut to U.S. interest rates from the Federal Reserve, which has already started to improve country attitude.

Russian authorities have announced the country will be taking measures to improve their export performance. Russian officials are now stating that by the year 2030 they want to expand export capacity by 50 percent. It is believed that by doing so Russia will have better access to Latin American and African markets. What is interesting is that Russia is focused on expanding port capacity in the Baltic Sea rather than the Black Sea.

The global vegetable oil market is paying close attention to the geopolitical differences between China and Canada. China is accusing Canada of violating anti-dumping trade rules on its canola exports, which will likely lead to them shopping elsewhere for needs. Anti-dumping laws prevent a country from exporting a commodity or product below fair market value. The next available canola supplier is Australia, who China is also accusing of violating these same trade laws. Given the low supply of palm oil in the global market, this may lead to China importing an elevated volume of soy oil this year to cover shortages. At this time this heavily favors the U.S. in the world market.

China’s Ag Minister announced the country will be taking additional measures to streamline and modernize its livestock industry. China has been doing this in hog production and is now focusing more on beef and dairy production. The basic plan is to consolidate the country’s dairy and beef production to make it easier to expand. This will also make for more consistent beef and dairy products, improving the quality of goods consumers are buying. 

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