Very few changes were made to the US corn or soybean balance sheets in the July WASDE report. Corn yield was left unchanged at 179.5 bushels per acre for a 15.16 billion bu (bbu) crop, up 160 million bu (mbu) from June on higher acreage. Old crop carryout decreased 100 mbu from the lower June stocks data, but this elevated production was enough to push new crop ending stocks to 1.43 bbu, roughly 80 mbu more than a month ago. 

Soybean production was left totally unchanged from last month with the yield at 50.8 bushels per acre and the crop size at 4.4 bbu. No changes were made to the overall demand side of the soybean balance sheets either. This left the United States with ending stocks estimates of 135 mbu on old crop and 155 mbu for new crop. This was disappointing to trade as reductions were predicted. 

We did see a change to the US wheat balance sheets, however. Total US wheat production decreased 150 mbu primarily from the drought that is impacting the spring crop. This put total US wheat production at 1.75 bbu. This decline carried through the balance sheets to give us ending stocks of 665 mbu for the 2021/22 marketing year, down 105 mbu from last month. Final ending stocks for the 2020/21 marketing year decreased a minimal 8 mbu to an 844 mbu total. 

The USDA did make sizable changes to the new crop world balance sheets. World corn supply at the end of the 2021/22 marketing year is now projected at 291.2 million metric tons (mmt), up 2 mmt from June. Soybean ending stocks are projected at 94.5 mmt which is also a 2 mmt increase from a month ago. The world wheat supply is expected to shrink 5 mmt due to the smaller US crop and total 291.7 mmt. 

US meat production was also updated with minimal changes as well. The USDA pegged beef production at 27.91 billion pounds for 2021 and 27.33 billion pounds for 2022. These were mostly steady from June. Pork production is estimated at 28.15 billion pounds from 2021 and 28.21 billion pounds for 2022. The 2022 number was a sizable 43-million-pound decrease from last month. The average steer value for 2022 increased 75 cents to $122.25 per hundredweight and the hog value was left unchanged at $56.25 per hundredweight. 

Even with tight commodity reserves we have not seen much urgency in the futures market, especially in foreign countries. The most noted of these in in Brazil where corn is still being offered at a substantial discount to corn from the United States. Argentina is offering corn at a lower value than both Brazil and the US. Given the much smaller corn crop in Brazil we would expect to see higher values. This lack of competition is capping US corn futures. 

Brazilian economists are predicting an ongoing increase in commodity production, and in turn, believes the country will own a larger share of the global market. The farm economy keeps improving in Brazil, mainly from elevated trade with the world’s leading importer China. This building demand is allowing Brazilian farmers to expand production and improve farming practices. It is believed that within 10 years Brazil will be planting 200 million acres of corn and soybeans compared to a current 170 million. Brazil is also projecting a 10 million ton increase to meat production over the same period. 

This increase in Brazilian production has started to impact land values in the country as well. Farmland values in Brazil have increased 30% in the past 12 months and are now at their highest level in the past twenty years. High commodity values have added to the increase in land values as well. These higher values have not deterred buying interest though, mainly because same as in the United States interest rates are cheap in Brazil will encourages spending. 

Some analysts doubt the predicted expansion in South America, however. These increases will depend heavily upon weather and some forecasters do not believe the current drought in the country will be remedied prior to the next planting season, including the Brazilian National Weather Service. Their opinion is the rainy season that typically begins in September will be delayed given current models, and this will again delay soybean planting as well as next year’s Safrinha crop. While this is possible, it is very early for the possibility to influence market direction. 

Trade is also monitoring Brazil’s new crop soybean sales. At the present time Brazilian farmers have sold just 19% of their projected 2021/22 soybean production. While this is above the 14% five-year average, it is well below the 36% of last year’s forward bookings. Brazilian farmers have also been hesitant to market their remaining 2020/21 bushels, with cumulative sales at 76%. This is also above average for this time of year, but less than sold a year ago. Thoughts that soybeans will continue to appreciate are keep sales depressed from last year’s pace. 

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named.  This is not independent research and is provided as a service.  As such, this is considered a solicitation.