By Karl Setzer

Trade continues to monitor our export sales totals and has questions on yearly expectations. According to the latest Census data, yearly export loadings on soybeans currently total 1.15 billion bu. While this is the second largest volume on record, it is down 22 percent from last year. This is mainly from a loss of Chinese business where shipments are down 92 million bu (mbu). While other buyers have stepped up with elevated purchases, they do not equal the loss of Chinese demand.

The same demand is being monitored on corn. Census placed marketing year corn exports at 630 mbu, only 3 mbu under last year. The USDA is forecasting a yearly decline of 328 mbu on corn exports as they see demand dropping once the South American crop becomes available. This is mainly from the large crop that is expected out of Brazil this year.

A prospect for U.S. corn is the higher priced feed wheat that is being offered out of the Black Sea. At the present time, feed wheat from that region is at a $10-$20 per ton premium to U.S. corn. While this seems positive, the Black Sea holds a sizable freight incentive over the United States into the Asian market, which is where most demand is coming from. The gains we have seen to soy meal are also a factor as feed wheat needs less supplementing than corn in rations.

One of the greatest unknowns in global corn and soybean trade is Chinese demand. In the latest WASDE updates the USDA left China’s corn demand unchanged at 26 million metric tons (mmt). This came even as nearly all other firms, including Chinese authorities, claim its imports will only total 20 mmt. The USDA did reduce China’s soybean needs by 3 mmt, and if soybeans continue to rally and feed margins are pressured, this may shrink even more.

While China may in fact need more corn and soybeans, the real question is where they may be sourced from. Trade relations between the United States and China remain strained, especially with China failing to satisfy its Phase 1 obligations. The United States has now indicated additional tariffs may be placed on China which will only heighten tensions. China may use the United States as a last resort for commodity imports if this continues.

More discussion has taken place on the U.S. soybean crush rate. In the February supply and demand report, the USDA increased the yearly crush volume by 25 mbu to a total of 2.215 billion bu. While crush remains high as processors try to capture as much margin as possible, we are seeing a build in soy products. This is more so on soy oil where reserves tend to increase from now until early April. A season decline in biodiesel demand is the leading cause of this elevated inventory at this time. Chinese officials are also seeing weaker crush margins, which is impacting global demand for soybeans, even with a shorter South American crop.

We are now at a point where potential U.S. acreage is becoming more of a true market factor. We continue to hear of expectations for lower corn plantings than last year due to a higher cost of production. Low input availability may also impact acreage, but this is a factor for all crops, not just corn. The most shifting is still likely in fringe areas with the South likely planting more cotton and the north seeding more wheat. Farmers in the heart of the Corn Belt have indicated they may up corn acres due to building interior demand though, negating losses in other areas.

U.S. livestock slaughter rates are not improving. The current year-to-date slaughter total on cattle is at 3.83 million head, a 3 percent decline on the year. Hog slaughter for the year stands at 14.9 million head, 10 percent fewer than last year. There is plenty of time in the year for the numbers to improve, but the longer it takes, the more concerned trade will become. Export demand remains slow as well, which is negating a portion of these low numbers.

When it comes to U.S. meat exports, all attention remains heavily focused on China, same as for the grains and soybeans. U.S. beef exports in 2021 were up 17 percent from the previous year, mainly from Chinese demand. China imported 422 million pounds more beef in 2021 than 2020. Other buyers bumped their yearly beef imports as well, but only by a combined 74 million pounds. This led to elevated beef values in the United States. China’s pork imports in 2021 were down 56 percent from 2020 though as the country promoted domestic usage to help support hog values.

This decline in Chinese pork demand dropped them from the top buyer of U.S. offers. Mexico is now the leading U.S. pork consumer with 2021 purchases up 31 percent from the previous year at a record 2 billion pounds. Chinese pork imports from the United States for the year totaled just 1.15 billion pounds and is expected to buy even less this year. Even with elevated demand from other buyers such as Mexico, it will be difficult to totally replace Chinese buying.

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.