By Karl Setzer

Trade is starting to receive more Brazilian yield data and is focusing on soybeans. While some fields in Southern Brazil have been stressed and it is showing up in yields, others are finding very high yields, with some reports of record production coming in. This is staring to generate ideas that maybe the reductions we have seen to Brazil’s total soybean production have been overdone.

The United States continues to see pressure from South America in the global soy market, but trade is starting to see this pressure lift, even with harvest starting in those countries, mainly Brazil. In the past two months the average soybean value in Brazil has increased 20 cents per bushel as drought started to impact southern states of the country. This is mostly for the summer months when Brazil tends to be in its later stages of harvest. While Brazil is still under the United States on soybean offers, this narrowing will likely bring some business to the United States, especially if Brazil’s crops continue to deteriorate.

South American corn values are also expected to start working higher in the near future as losses in that crop are also being reported. Sources in Brazil claim their crop will be down from 4 to 5 million metric tons (mmt) due to recent weather. There are thoughts that these losses could be twice this size if weather does not improve soon. While this would reduce Brazil’s corn crop from initial estimates, it would still be nearly 25 mmt larger than last year. Not as many adjustments have been made to the Argentine crop as the second half of that is still being planted.

While harvest is taking place in Brazil, planting is still happening in Argentina. Argentine farmers are now seeding the last half of their corn crop which will be harvested in late spring. The seeding of this crop was delayed on purpose to try to avoid the drought conditions that La Nina patterns tend to bring the country. This is the main reason why analysts have been hesitant to alter their Argentine corn production estimates.

Even with harvest advancing, soybean sales in Brazil have been limited. So far Brazilian farmers have only marketed 36.5 percent of their new crop soybeans. This compares to 58 percent last year and the five-year average of 40 percent being sold. Thoughts that soybean values will continue to rally are limiting Brazil’s soybean sales, as well as the higher revenue being generated by the sales that are taking place. Old crop soybean sales in Brazil are also slower than normal, with the crop reported as 95 percent marketed compared to the average 99 percent. Record old crop production has also extended the marketing window for that crop.

The U.S. wheat market is becoming more of a market topic. Demand for U.S. wheat has been sluggish in recent weeks, but this is expected to change in the near future. Many of the U.S.’s leading competitors are expected to deplete their wheat exports by mid-summer. This is especially for suppliers that are going to restrict their exports starting in late winter. This will leave the United States as a main supplier for the global market until other harvests take place.

U.S. slaughter numbers have become mixed in recent weeks. Cattle slaughter is up 5.6 percent from last week but is down 2.6 percent from a year ago. Hog slaughter is steady on the week but down a sizable 8 percent on the year. Given recent COVID outbreaks and their impact on U.S. processing plants these slow rates may last for several more weeks.

The slow processing rate on pork would normally give the hog complex support, but slowing exports have countered this. In November, the United States exported 581 million pounds of pork. While this was a six-month high, it was down 8 percent from last year. The primary reason for this is the lack of Chinese demand, with November sales to that buyer down 73 percent on the year and the least amount since February 2019. This is being partially countered by other buyers surfacing for pork, mainly Mexico, where demand is up 33 percent on the year.

Retail beef values are becoming more of a factor in that market. Average retail beef values in the United States are 24 percent higher than a year ago and a record at $7.85 per pound. This is expected to change in the near future as the U.S. beef supply rises. This reprieve may be short lived however, as even though the current U.S. cattle supply is growing, high feed costs are starting to take their toll on the industry, and feeders are cutting back on livestock placements.

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