Several daily sales of soybeans have been announced over recent weeks. These have been for new crop delivery which is not uncommon at this time of the year as importers start looking past the South American harvest. The United States has become the favored choice for soybeans in the global market from October forward. While this is supportive for the complex, the window for sales will be very narrow as importers are already looking to only secure enough coverage to bridge the gap between the U.S. and next South American harvest. Brazilian exports are also likely to slow but not stop given the size of this year’s crop. Elevated domestic usage in Brazil is the unknown in this outlook as more Brazil soybeans will be needed for crush to cover soybean production losses in Argentine production.

The same scenario is happening in the corn complex as importers are currently sourcing needs from Brazil at a sizable discount to the U.S. While demand has perked up in recent weeks, cumulative export demand on both corn and soybeans remains well below USDA expectations, and until this corrects trade will show less interest in daily sales.

The Brazilian firm Safras has updated their 2023/24 soybean crop estimate for the country and put it well above most other predictions. Safras believes next year’s Brazilian soybean crop will total 171.5 million metric tons (mmt), well above this year’s 156 mmt crop. This is also more than the current USDA estimate for a 163 mmt crop. Higher futures that will lead to expanded acreage and improved weather conditions are behind the larger Safras crop estimate.

Safras also believes Brazil will export 99 mmt of soybeans next year compared to the 95 mmt export estimate on this year’s crop. The Safras new crop crush estimate is at 55 mmt, also above the 53.5 mmt projection for this year.

While Brazil produced a record soybean crop this year many farmers in the country claim their annual income will decline from last year. This year’s Brazilian soybean crop was reported at 156 mmt. Of this, only 66 percent has been sold compared to the normal 80 percent. These sales also took place at lower values due to the rapid price drop in the global market. The average selling price on soybeans this year in Brazil is 30 percent lower than a year ago. While farmers will have more soybeans to sell, there are thoughts the loss of income will restrict expansion in plantings to between 1 and 3 percent. This would be the smallest increase in plantings in 17 years.

Another development in Brazil that is being closely monitored is the lack of necessary infrastructure to handle larger crops. There have been numerous improvements to transportation routes and methods in Brazil, but the country is still short of needed storage, especially in years such as this when farmer selling is slow. This has caused many grain companies to turn to temporary storage, but this is not a long-term solution. As Brazil produces larger crops it will need more storage and export terminals as well. One of the main suppliers of revenue to make these improvements in recent years has been China.

Weather remains one of the top fundamental factors in today’s trade, but we are starting to see a shift in focus. Recent rains have been viewed as a great benefit for U.S. crops with many of the driest regions of the U.S. seeing precipitation in recent weeks. Current weather models indicate most of August will be very favorable as well. The combination of these factors has caused a reduction in the volume of risk premium that is being held in futures, and more may be withdrawn if current conditions continue.

This wetter end of the season is being credited to a strengthening El Nino which tends to bring better growing conditions to the United States. Not all regions of thew globe will see these benefits though, as El Nino patterns tend to stress other production areas including Asia and Australia. The concern in the Asian market is that the palm crop will be affected, and oil production will decline. This could bring even more export business to the U.S., especially with a small soybean crop in Argentina. In Australia the concern is on wheat, and while recent crop estimates have increased from initial outlooks, they are all below last year’s record crop.

The August 1st cattle on feed report continued to point out the shrinking U.S. cattle herd. There were 11.03 million head of cattle on feed on August 1st, 2 percent less than a year ago. July cattle placements totaled 1.62 million head, just 92 percent of last year’s total. This was 3 percent less than trade was expecting and indicates the U.S. beef supply will continue to tighten. Marketings in July were down 5 percent from last year at 1.727 million head and in line with expectations.

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