By Karl Setzer

 Even though early in the marketing year, trade is showing more interest in the volume of export sales the United States has on the books. Corn sales started out the year at a record pace but have receded since. After initially being 30 percent ahead of last year, bookings are now just 4 percent above a year ago. The real concern is on soybean sales, which currently trail last year by a large 35 percent. This is mainly from the lack of Chinese buying, as sales to our largest buyer are 37 percent less than last year at this time. Wheat sales also trail last year by 20 percent at the present time.

The lower export numbers on soybeans are sending mixed signals. While cumulative soybean sales are well behind last year, they are still the third largest on record. The big difference between this year and others is the 300 million bu (mbu) fewer sales to China as the country cuts back on hog production. China’s hog industry is also becoming more efficient than in the past. This will likely alter the country’s overall feed grain demand for years to come.

It is not surprising that U.S. export loadings are well behind last year as well. At the present time U.S. corn loadings total 44.86 mbu, a 60 percent reduction on the year. Soybean inspections only total 34.6 mbu, down a huge 81 percent from last year. Wheat inspections are better at 294 mbu, but still off 13.5 percent from 2020. If these totals do not increase soon, we will likely see adjustments to projected ending stocks.

Not only are U.S. grain and soybean exports being monitored, but the meats as well. Demand for U.S. beef remains very strong, with last week’s sales hitting an eight-week high. Total U.S. beef exports for the calendar year are up 29 percent. Pork demand is 2 percent under last year, though, as our leading buyer, China, is fulfilling its reserve needs with domestic pork. This has caused a 75 percent decline in their U.S. pork purchases.

The September cattle slaughter numbers contained some mixed data. The total number of cattle slaughtered for the month totaled 2.73 million head, down 1 percent from both August and September 2020. The average steer weight was down 10 pounds on the year while the heifer slaughter weight was up a large 94 pounds on the year. The combination of these two levels generated a beef production number that was just 98 percent of last September, but still the second largest monthly total since 2003.

A thought this report raises is the number of animals being liquidated. There are concerns that with poor pasture conditions and high feed costs, the United States may see more contraction in cattle numbers. One of these is in dairy, where the U.S. milk cow herd shrunk by 25,000 head in September. If this trend continues, we may start to see alterations to feed grain usage projections.

While early, we are already starting to see debate in the market over next year’s acres. While this has been a factor for several months given the tight stocks to use on corn and soybeans, it is starting to intensify. This is from the fact producers across the United States start planning next year’s crops as soon as harvest is complete. The cost of corn inputs has already increased from last year and there are thoughts they will climb even higher which may start to impact crops acres.

A result of this high cost of production may cause a shift in acres to the crop with the lowest costs, regardless of commodity values. This is not uncommon in years such as this but does tend to be less of a factor when commodity values remain elevated. There is speculation in the market we could see elevated wheat acres this coming year given wheat’s lower cost of production. This scenario may also lead to elevated double cropping with soybeans and winter wheat given wheat’s favorable returns.

While mostly favorable, weather remains a factor in current price discovery. The United States is expected to remain mostly dry for the next 90 days which will not only favor remaining harvest, but likely allow for a large amount of fall tillage as well. Dry weather is bearish at the present time, but if we start to see indications of these conditions lingering into our next production season the markets will react. The United States cannot afford any production losses this year or next. This will likely keep risk premium elevated in the U.S. market even when the current crop year ends.

One development that is tempering market reaction to drought conditions is this year’s yields in abnormally dry regions of the country. Drought impacted several areas of the Corn Belt this year, but even so, yields are starting to come in at the top side of expectations. Some regions of the Corn Belt reported record yields. Field scouts claim this shows us the timing of rains during the growing season can be just as beneficial as overall precipitation totals.

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