For the past several months trade has been focused on Brazilian soybean production and how the crop will be record sized. The USDA has projected Brazil’s soybean crop at 154 million metric tons (mmt), up 1 mmt from their previous projection. Several private analysts in Brazil believe the crop will be even larger, with some approaching 160 mmt.

We are now starting to see more interest on Brazil’s corn balance sheets. The corn crop in Brazil is also forecast by the USDA to be a record at 125 mmt. Privates claim the crop could actually be closer to 130 mmt. While this seems like it would be negative for trade, it may not end up pressuring futures as much as expected. Corn ending stocks in Brazil are forecast to fall to a modern day low this year at just 8 mmt. Given current production and demand forecasts, ending stocks may be closer to 7 mmt at the end of next year. This is especially the case if the Argentine crop continues to shrink and will need Brazil supplies to cover usage.

Chinese officials announced that they are developing a three-year plan to reduce their use of soy meal in feed rations. Chinese feed rations currently include 14.5 percent soy meal, but their hopes are that by 2015 this will be down to 13 percent. This is part of China’s overall desire to become less dependent on imports for feed needs. At the present time, 80 percent of China soybean needs are imported. Their plan includes the use of alternative protein sources, including animal by-products that many other countries have banned, such as the US. China is also trying to develop high quality grass for use in feed rations to reduce the need for protein supplements.

Even though Brazil is still focused on this year’s crops, we are already seeing predictions on next year’s production, with more interest on corn. This is because the world corn supply is tightening faster than soybeans. Brazilian officials are projecting 2023/24 corn plantings of 53.2 million acres, an increase of 1.3 percent from this year. Corn plantings this large have the potential to produce a 133 million metric ton (mmt) crop, 6 percent larger than this year’s 125 mmt crop estimate. Some analysts believe this year’s Brazilian corn crop is being heavily underestimated though and may reach 130 mmt.

We are starting to see more interest on long-range U.S. weather outlooks. While there is nothing threatening at the present time, some models indicate this could change as the growing season progresses. This is from the transition to an El Nino weather pattern. El Nino’s tend to bring drier conditions to the Corn Belt and increase chances of drought. While it is too early to be overly concerned with this shift, it will be closely monitored as the U.S. cannot afford any production losses this year, especially on soybeans.

Chinese pork production is starting to rebound from its recent declines. For the first quarter of 2023, China reported pork production of 15.9 million tons, a 1.9 percent increase from the same period in 2022. This was the highest pork production for the time frame in five years as China recovers from the outbreak of African swine fever. Total pig inventory in China is up 2 percent on the year at 430.9 million head. Hog slaughter in China is also up 1.7 percent on the year.

U.S. exports continue to be pressured from two different points. One of these is the size of the crops coming out of South America and how it has pressured global values. This is mostly being seen in the soy complex at the present time, where the record crop in Brazil has put considerable pressure on basis values. This has caused the spread between U.S. and Brazil soybeans to reach $1.40. At this point it becomes economical for the U.S. to import soybeans which we are starting to see take place. While the volume of soybeans U.S. processors have bought is low, we could easily see more purchases in the future. The U.S. is now seeing the price spread on corn widen as well. When the Safrinha harvest gets underway in another six to eight weeks, this spread will widen even more and make Brazilian corn even more affordable for an importer.

Another issue for U.S. exports at the present time is currency valuations. The firm U.S. dollar has deterred export interest for some time, and now that foreign currencies are starting to falter it is making their offers even more attractive. One of these is Brazil, where political unrest is causing the Real to drop. This also encourages selling in the country as more revenue can be generated with dollar-based sales.

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