This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Harvest continues to rapidly progress in the Midwest, still without much rain to slow the combines down. With the federal government still shut down, we do not have an official harvest pace estimate from the USDA. We were told we would get details of the farmer aid program being considered, but then the USDA said they will not be able to release anything until the government shutdown ends.
One weekly report we do still get from the USDA, despite the shutdown, is export inspections. Inspectors are considered essential, so they continue to work, which allows ships to be loaded and exports to continue. But that only gives us a view of what is currently being loaded, not what new sales, if any, are being put on. This week, corn export inspections were lower than expected, wheat inspections were in the middle, and soybean exports were just above expectations. However, the expectations were very low on soybeans since we still are not making positive progress with China. In fact, it seems like we are going the wrong way with China. Trump’s social media posts do not give much confidence we are moving in the right direction.
Usually, we are the primary supplier to China from October until January. They bought Argentine beans to cover their October and November usage this year and now have their needs covered through November. The best we can tell, they do not have any coverage for December and January. They are either going to need to release beans from state reserves or buy beans from somewhere else—hopefully from us. Brazilian planting pace has been a little ahead of average so far. The 30-day forecast looks nonthreatening, but there is a good deal of uncertainty with the long-term forecasts. It is worth noting that the GFS is much less generous with the rainfall totals. Assuming planting finishes on schedule in Brazil, they will have beans available for shipment by the end of January. So, right now, if trade talks go well, we still have a small window where U.S. beans are competitive into China. Their December/January usage is estimated between 290 million and 330 million bushels. During the last trade war (and African swine fever), China still bought 500 million bushels from us. For comparison, in the best year in the last 10, China bought around 1.3 billion bushels of U.S. beans. This year, it looks like the best-case scenario at this point is around 330 million bushels, and that is assuming positive progress is made on trade.
On a positive note, we got the NOPA crush report on Thursday showing massive domestic usage for soybeans, setting a new record for September. All the crush capacity we have added in the last few years has dramatically increased domestic usage of soybeans. The last two marketing years, we have set new monthly records 10 months of the year. September is the first month of the new marketing year, and we started it off blowing last year’s record out of the water. In order to keep increasing domestic usage to make up for the lack of exports, we need help from biofuel policy.
Corn and soybeans worked hard to claw back some of the losses from last week’s Trump tweets. That puts us back in the same range the market has been trading in for what feels like forever now. Corn basis is really starting to strengthen in the Southeast since the crop has been put away now. Soybean harvest is starting to pick up steam.