Even though harvest is advancing across several regions of the United States, very little inventory is being sold. The majority of movement from the farm right now is what was previously booked. So far this has favored soybean deliveries over corn. Most farmers report having enough space to hold their crops this year and will only move inventory once this is fully utilized. Given the fact many farmers have deferred income they can use for cash flow this may limit commodity movement until later in the marketing year.

When it comes to U.S. exports all interest remains on China. The biggest question surrounding China right now is how much product they need to import, mainly soybeans. China has recently canceled U.S. soybean bookings, giving the indication they have enough soybeans in storage and on the books to satisfy demand.

At the same time, China is paying a considerable premium over the United States to secure soybeans from Brazil for fall delivery, right when the U.S. export program tends to ramp up. This is generating concerns that China is simply avoiding the United States in the global market, and we may see their overall demand fade.

There is also uncertainty in the market surrounding China’s corn demand. Last week China reportedly canceled corn bookings from Ukraine citing a lack of import certificates. While possible, China is known to overlook such issues when they need a commodity. The concern now is that low test weight will be an ongoing issue for the United States, and China will use it to negotiate import values.

China is also a growing factor in U.S. pork demand. Hog futures have been under pressure recently with a lack of demand being a primary hindrance. U.S. pork exports for 2021 are currently 7 percent less than the volume from a year ago. This decline is mainly from China as that country is using more of its own pork to replenish reserves in an effort to support local pork values. This has led to a decrease in Chinese pork imports from the United States of 75 percent from last year. China has greatly increased its beef imports from the United States though, with year-to-date imports up 400 percent from last year.

A question that is starting to surface is if domestic demand for corn and soybeans will increase enough to help offset potential export losses. Ethanol manufacturing has been on a steady rise for the past several weeks and demand will likely cause this to last. We have also started to see the U.S. crush rate pick back up as new soybeans become available. If global grain and soybean production increases as much as some models indicate, the United States may need to rely more on domestic consumption for the foreseeable future.

Argentine corn production is expected to increase this year to record volumes, so it is not surprising the country’s exports are also forecast to rise. Officials in the country believe their corn exports this year will total 38 million metric tons (mmt), a 2 mmt increase from last year. While this is not a huge amount, it is extra competition for the United States in the world market. More pressure is expected to come from Brazil where corn production is forecast to be 30 percent greater than last year.

The announcement that farmers in Argentina have stated they will expand corn plantings this year and cut back on soybeans could end up being a great benefit for the United States. Argentina is the world’s leading supplier of soy meal and oil, and while this will likely continue even after a shift in production, the United States may become more of a global supplier. This is welcomed news by the U.S. crush industry as elevated biodiesel production is expected to increase soybean usage and oil demand. Hopes are a reduction in Argentina’s crush will elevate U.S. meal demand as well.

One development with this year’s corn crop that may have a long-lasting impact is the spread of Tar Spot. This fungus surfaced a few years ago and has been spreading since. Tar Spot tends to affect stalk quality but can reduce yield by 40 bushels per acre according to several agronomists. The fungus can remain in crop residue and tends to be a greater factor in fields that are continuously planted to corn. While the fungus can be controlled with chemicals, repeated applications will impact returns.

According to data from the Association of Equipment Manufacturers, U.S. tractor and combine sales are higher than a year ago. So far in 2021, U.S. sales of tractors are up 11 percent from last year and combine sales are up 18 percent. High commodity values are the primary reason behind the elevated equipment demand. Current logistic issues have combined with this demand to cause tight dealership inventories though, which is keeping equipment values elevated.

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