Cash markets are starting to show just as much volatility as futures. Interior basis values collapsed in several areas last week. At times this can generate cash movement, but that did not happen this time, and farmers became even more tight-fisted with their inventory. Many buyers are now being forced to firm bids to encourage sales.

While this has brought some bushels to the market, most are moving in the Western Corn Belt. Most movement in the West is producers taking advantage of free deferred pricing contracts. Farmers in the Eastern Belt have marketed a bigger share of their inventory, leaving few uncommitted bushels to sell.

The U.S. export market is also getting a little more aggressive for bushels. The U.S. dollar has dropped to contract lows while the Brazilian real has reached new highs, heavily favoring the U.S. in global trade. The U.S. was already competitive with South America in global markets, and this widening spread favors the U.S. even more. Exporters are starting to see more new crop business, further supporting basis values. Some interior buyers are now being forced to pay rail bids to prevent inventory from being shipped out.

The Brazilian firm AgroConsult has updated its safrinha crop estimate, increasing it an incredible 10 million metric tons from last month. AgroConsult is now projecting a safrinha crop of 123.3 mmt. This increase would put Brazil’s total corn production at a record 150 mmt, which is well above any other crop estimate, including the USDA’s 130 mmt. While not much credit has been given to this estimate, it does give the indication of a larger Brazil corn crop.

Brazil’s domestic commodity consumption has been steadily increasing, same as in the United States. Analysts in Brazil see a 3-million-acre increase to production area this coming season, but even with this, Brazil’s exports could contract from elevated domestic usage. This is from expansion to renewable fuel production. Similar to the rest of the world.

Deforestation in the Amazon has long been an issue in Brazil and is again making headlines. Groups in Brazil are taking measures to close a loophole that has allowed farmers to bypass some laws that prohibit Amazon deforestation. Data, including satellite imagery, indicates 620,000 acres of Amazon have been deforested since 2018. Since 2008 deforestation has totaled 2.5 million acres. More importing countries are now avoiding needs from sources with poor environmental policy, and Brazilian farmers and exporters are starting to take note.

A noticeable trend has started to develop in the U.S. cattle market. We are seeing cattle weights decline, with carcass weights down for three consecutive weeks. This indicates lots are current and some animals are being pulled forward to capture market premiums. Beef carcass weights averaged 904# over the past week, down 5# from the prior week, but still 15# heavier than a year ago.

Cattle have been running up to 45# and 50# above a year ago as animals were held for higher values. This added weight has been offsetting low slaughter numbers, and now that they are declining, packers are showing more interest in covering needs ahead of peak summer demand.

Soymeal futures recently fell to an eight-year low as concerns build over the rising U.S. product inventory as crush expands to meet a growing biofuel demand. Meal is also being pressured by news China has booked 30,000 mt of product from Argentina. This was the first cargo of meal to trade between the two since China approved Argentine imports in 2019. Chinese officials state they are trying to expand import sources to limit price and production risk. China is also looking for additional meal sources following the recent trade dispute with the U.S.

The USDA has announced it is considering plans for poultry vaccines. This comes after the financial losses in the U.S. poultry industry from bird flu outbreaks that has caused widespread culling in commercial and private flocks. Data shows that since the latest outbreak began in 2022, the U.S. has lost 175 million birds. The greatest impact from this has been on the U.S. egg supply with shortfalls being covered with imports.

While vaccines may help control the spread of disease, poultry feeders are uncertain on how this will be received from U.S. trade partners. 

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