Even though we are relatively early in the marketing year, there are more analysts stepping forward to claim U.S. corn demand is underestimated. The belief is Brazil will be out of exportable corn by mid-summer and will need to make imports. The question is where this corn may be sourced from as other South American countries are forecast to produce small crops as well. In turn, more buyers are forecast to secure corn needs from the United States. While this may be possible, it will depend heavily upon the size of the Safrinha crop that is just getting planted.

China has been a heavy used of wheat for feed but this is expected to change. Last year, China used 40 million metric tons (mmt) of wheat for feed as corn values rallied to values that cut into margins. China harvested a record corn crop this year, though, and thoughts are this could cut wheat feeding nearly in half. Sources in the country claim wheat feed in the 2021/22 marketing year will fall between 10-24 mmt. This would likely elevate the country’s need for soy meal to make up for the protein difference between corn and wheat.

We continue to receive a steady stream of crop estimates out of Brazil on the country’s soybean crop. Some of these have dropped as low as 127 mmt, well below initial estimates of 147 mmt. This is also 12 mmt under the current USDA crop forecast. While the crop has been reduced from adverse weather and may in fact be that small, this level of production seems unrealistic at this time. If Brazil’s crop is even close to 127 mmt, it will undoubtedly increase demand for U.S. offers.

Even with soybean harvest well underway in Brazil we are seeing very little fresh selling interest on new crop bushels. There are analysts who are taking this as a sign the crop is not very good and overall production will be down. While that is possible, it is not necessarily the case. Farmers in Brazil generated large volumes of revenue from last year’s record crop and may not need additional income at this time. Farmers in Brazil are also becoming better at marketing and selling their crop later in the year to avoid weak harvest basis values, same as farmers are doing in the United States.

We are also seeing forecasts released on the South American corn crop. At the present time most analysts have total South American corn production at 157 mmt. While this is a decline from initial estimates, it is still 20 mmt more corn than South America grew last year. It is very difficult to accurately predict South American corn production at this time though, as very little of the Safrinha crop has been seeded.

Depending upon how current geopolitical events unfold, the world market could start to see more wheat exports out of Russia. The Russian government has been adding to its export tax rate on wheat to slow demand and this has been working. Cumulative wheat exports out of Russia are down 20 percent from last year given the elevated taxes that reached nearly $100.00 per metric ton. Russia is now lowering this rate, and while still over $95.00 per ton, indicates the country has restricted enough wheat demand for now.

The U.S. cattle slaughter pace remains depressed. The weekly slaughter rate on cattle is currently 6 percent behind a year ago. Even so, beef production is running at record levels. In the month of December, the United States produced a record 2.4 million pounds of beef. This is from an average steer weight that is up six pounds per head from last year. There are thoughts that if the slaughter rate remains slow, this weight will continue to increase.

The marketing year on U.S. beef is just getting underway and demand is already at a high level. So far, the United States has sold 234,000 metric tons of beef for export for 2022. This is from ongoing Chinese demand, as beef sales to China account for 20 percent of the total volume. While much of this was from forward contracting, China continues to show up in weekly sales lists. We also continue to see elevated export demand to Japan and Mexico. The combination of these could easily push U.S. yearly beef exports to a record 1 million metric tons this year.

Packer data has shown us that steers are coming in at very high weights, but the same data shows this is not the case on hogs. Hog weights were high at the end of 2021 with many averaging two pounds per hog above average. Hog weights have since corrected and are now two pounds per head under a year ago. When combined with a 10 percent reduction in the slaughter pace this has cut U.S. pork production by 15 percent from last year. Pork demand has also faltered though, and U.S. pork supplies are holding steady for now.

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