Category: Crop Marketing

With the US harvest concluding, markets will focus on South American weather forecasts and crop progress. For the 2023/24 marketing year, Brazil and Argentina are projected to account for 53% of global soybean production and 15% of global corn production. By comparison, the US produces 32% of the world’s corn and 28% of the world’s soybeans. Combined, these three countries dominate corn and soybean exports. The three countries account for 89% of soybean exports and 75% of corn exports. As such, production in these three countries has major implications for global prices. This article examines trendline corn and soybean yields for Argentina, Brazil, and the US.

Figure 1. Average Corn Yield by Country, 1977/78 to 2023/24

There are major differences between Argentina, Brazil, and US corn yields. Differences in corn yield can be partially explained by production practices, such as Brazil corn production occurring largely as a second crop after soybeans. For 2023/2024, US corn yield is projected at 173 bu/acre – 83% higher than the global average; Brazil at 90 bu/acre – 5% below the global average; and Argentina at 123 bu/acre – 31% above the global average (Figure 1). Trendline yields also reveal significant differences. Over the past 33 years, Argentina has added 1.92 bu/acre/year, the US has added 1.85 bu/acre/year, and Brazil has added 1.61 bu/acre/year. Since 2014/15, yields for all three countries have flattened substantially, with average increases of less than 0.25 bu/acre/year. Yield variation is also an important feature. Since 2000, Argentina corn yields have been substantially more volatile than Brazil or the US. Argentinian volatility may be partially attributed to a greater impact from extreme weather and economic instability in Argentina, creating greater challenges with input availability, cost, and utilization.

Figure 2. Average Soybean Yield by Country, 1977/78 to 2023/24

Soybean yields across the three countries are more uniform. Projected yields for 2023/2024 are 44 bu/acre, 53 bu/acre, and 50 bu/acre for Argentina, Brazil, and the US, respectively (Figure 2). Brazil has led the way with annual yield improvements, increasing trend line yield by an average of 0.69 bu/acre/year, followed by the US at 0.50 bu/acre/year, and Argentina at 0.29 bu/acre/year. Similar to corn, Argentina and US trend line yields have flattened in the past ten years; however, Brazil’s average yield gain has increased to 0.78 bushels per acre per year over the last decade. The variation in Argentina’s annual yields is significantly greater than that of Brazil or the US.

Yields (along with harvested acres) will be important in determining production in each country and potentially their share of the export market, particularly for soybeans, as a larger share of global production is concentrated in three countries. If yields are forecast below trendline it would be supportive of higher prices and vice versa. Changes in projected yield and production from USDA, CONAB (Companhia Nacional de Abastecimento, National Supply Company, Brazil), and private companies have the potential to influence market direction.

References and Resources

USDA Foreign Agricultural Service – Production, Supply and Distribution. https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery

CONAB – https://www.conab.gov.br/

---

In the international rice arena, much of the attention has been focused on the Indian Government’s July 2023 decision to ban non-basmati white rice exports. This is significant to the global rice market as India is the world’s largest rice exporter. The USDA reports India’s 2022-2023 marketing year share of total global rice exports at 40%, as shown in Figure 1 (USDA ERS, FAS, 2023). India has dominated the international market for some time due to low domestic prices and high stocks – resulting from a bevy of trade-distorting subsidies – which allows India to offer rice at substantially lower prices to international buyers. Almost half of India’s exports are non-basmati parboiled rice, with the ban affecting approximately 15% of global rice trade. 

The decision by India to ban rice exports was a means of countering rising food inflation and ensuring sufficient domestic supplies heading into an election year. Also factoring into the government’s decision were uncertain weather conditions attributed to El Niño (warming conditions and potential drought). Indian rice stocks remain plentiful, due in part to their much-scrutinized subsidization policy for rice.  The non-basmati rice ban has not been the only policy action on rice taken by India over the last year.  In September 2022, India banned exports of broken kernel rice and placed 20% tariffs on rough rice, brown rice, and regular milled white rice.  In August 2023, a 20% tariff was placed on parboiled rice exports through mid-October and a $1,200 per ton minimum export price was placed on basmati rice. 

The Indian government has insulated Indian rice farmers from falling domestic rice prices. It sets market support prices and subsidizes crop inputs like fuel, fertilizer, and water to support farmer incomes and lower food prices. In April 2023, a consortium of grain exporting countries, including the U.S., filed a second counter notification at the World Trade Organization, formally challenging India for obscuring the true level of price supports and subsidies it provides for its wheat and rice producers (USA Rice, 2023).

While policy decisions by the Indian government have had an impact on global rice prices, the question remains: Will U.S. rice prices see support from this policy-induced market shock? The short answer is ‘not immediately – but opportunity might exist later in the year.’ 

Global rice prices can support the domestic market to a certain degree as a result of trade flows of both Indian and U.S. rice. Rice exports from India are primarily destined for African countries (e.g., Benin, Senegal, Kenya, Togo, Guinea, and the Ivory Coast). These countries predominantly import broken rice, which is much cheaper than milled rice. In addition, the Philippines, Malaysia, and Vietnam are also reliant on Indian rice exports. Whereas, for the U.S., major rice markets include Mexico, Canada, Haiti, and Latin America. Mexico is primarily a buyer of U.S. rough rice. The Middle East is a region that imports from both the U.S. and India. However, sales to the Middle East – while important – are not ‘core’ markets for U.S. rice. 

The USDA FAS reports that Thai, Vietnamese, and Pakistani export rice prices have increased (Figure 2) because of the Indian ban as countries begin to cover their needs, raising concerns that other countries will also restrict or ban exports (notably, Myanmar recently announced that it was temporarily restricting exports). Thai export prices had risen rapidly from late July through mid-August, peaking at about $650 per ton. Currently, Thai prices are quoted at $595 per ton. Like Thailand, Vietnamese export prices rose quickly but have since retreated to $616 per ton. Asian buyers are holding off from making purchases in hopes that prices continue to fall. U.S. rice export prices for No. 2 4% broken long grain milled rice remain quoted at $760 per ton, unchanged since late January and the highest since October 2008. U.S. quotes for Latin American markets were also unchanged since late January at $725 per ton. Indian price quotes have been unavailable since the start of the export ban which came into effect on July 20^th. Prior to the ban, India rice was quoted around $450 per ton.

Expectations of a significant increase in U.S. rice supplies has helped keep U.S. rice prices stable. However, the export ban in India ultimately will benefit U.S. rice producers in the short run with stronger U.S. export demand likely developing in the Middle East (e.g., Iraq). U.S. rice may also be able to secure additional exports into the Caribbean and Central and South American markets which will contribute to capturing lost market share. U.S. rough rice sales to other Latin American markets are expected to increase in 2023/24. In the previous marketing year, the U.S. saw significant erosion of its market share in Mexico to South American suppliers, mostly Brazil, due to their more competitive prices. Long term, high global prices will increase global rice production. Growing stockpiles of rice in India – compounded by India’s extensive use of trade-distorting subsidies – will ultimately be dumped on the world market, thus causing world rice prices to over-correct (CoBank, 2023).

Figure 1. Global Rice Exports, by Country Share (%), USDA FAS. 

Figure 2. Weekly FOB Export Quotes ($/ton) for Long Grain Milled Rice, USDA FAS. 

References

CoBank. “India’s Rice Export Ban: Short-Term Benefit, Long-Term Challenge for U.S. Rice”. August 17, 2023. 

USA Rice Federation. “India’s Rice Subsidies Under Fire at WTO by U.S., Thailand, and Others”. USA Rice Daily, April 6, 2023. 

USDA Economic Research Service (ERS). “Rice Outlook”, September 2023. https://www.ers.usda.gov/webdocs/outlooks/107418/rcs-23h.pdf?v=8325.4  Date Accessed: September 14, 2023. 

USDA Foreign Agricultural Service (FAS). PSD Online.  https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery Date Accessed: September 25, 2023.

---

Deliberto, Michael. “How Market Dynamics Separate World and U.S. Rice Export Prices.” Southern Ag Today 3(44.1). October 30, 2023. Permalink

This article examines how low river levels impacted off-farm storage utilization last year for the five Southern states bordering the Mississippi River (Kentucky, Missouri, Tennessee, Arkansas, and Louisiana). In particular, we look at changes in corn held in off-farm storage. USDA-NASS (2023) reports off-farm stock numbers quarterly, including bushels stored on and off-farm. Net off-farm storage disbursement can be calculated by subtracting off-farm stocks in the previous quarter. For 2022/23, corn disbursements trailed the 5-year average in the five southern states bordering the Mississippi River. Lower net disbursement was likely caused by low river levels, which increased barge freight and caused the corn basis to widen (Gardner, Biram, and Mitchell, 2023). Once river levels returned to normal, elevators tended to barge soybeans as they have a higher value on a per-bushel basis, further delaying corn shipments (USDA-NASS, 2023). Figure 1 shows aggregate corn disbursement rates for all five states compared to the 5-year average. Figure 2 further breaks down the data by state. Typically, most corn is put in off-farm storage in Quarter 1 (Q1) of the marketing year, which consists of September, October, and November. Corn is then disbursed as the marketing year progresses. 

Figure 1 indicates that in Q2 of last year, negative disbursement occurred. Negative disbursement percentages indicate that corn was added to off-farm storage. Additional corn storage in Q2 was likely driven by river level declines, which slowed corn shipments through the Mississippi River. The bulk of corn added to off-farm storage in Q2 occurred in Louisiana and Mississippi (Figure 2). As elevators in Mississippi could not move corn downriver, they filled their storage space and stopped taking delivery, causing producers to delay harvest and “store” corn in the field. Louisiana could still utilize the river for transport. Thus, the increase in off-farm supplies in Q2 was likely driven by producers in surrounding states delivering to Louisiana from more northern states. In Q3, the basis neared normal. On a percentage basis, the states disbursed 40% (-1% less 39%; figure 1) of the corn stored in Q1, the same as the 5-year average (10% less 50%). In Q4, producers disbursed 5% (39% compared to 34% on average) more off-farm corn than average, likely allowing some producers to capture the high June prices induced by drought fears on new crop supply. Q4 disbursement rates trailed 6% below the average, indicating that close to 23.5 million bushels were carried into the new marketing year. 

Looking ahead to the 2023/24 marketing year, river levels have again caused the basis to decline, and off-farm storage will be an important risk management tool in these five states. As river levels improve, the basis should rise to normal levels. However, slow disbursement in the first quarter of the 2023/24 marketing year may hinder basis improvement. 

Figure 1. Aggregate Net Off-Farm Storage Disbursement for Mississippi River Bordering Southern States by Marketing Year Quarter (2022/23 vs. 5-Year average)

Figure 2: Net Off-Farm Storage Disbursement for Mississippi Bordering Southern States by Marketing Year Quarter (2022/23 vs. 5-Year Average)

Sources:

Gardner, Grant, Hunter Biram, and James Mitchell. “Low River Levels, Barge Freight, and Widening Basis.” Southern Ag Today 3(39.1). September 25, 2023. Permalink.

USDA-NASS. 2023. Washington, DC  

---

Gardner, Grant, and William E. Maples. “River Levels and Off-Farm Storage Disbursement.” Southern Ag Today 3(43.1). October 23, 2023. Permalink

World wheat production exceeded world wheat consumption for 7 out of 8 marketing years from the 2013/14 marketing year to 2019/20. The stocks-to-use ratio as measured by days of use on hand at the end of the marketing year increased from a 104-day supply to 146 days on hand over the same period.  Since 2020/21, we have seen four consecutive years of total use greater than production. Days on hand have subsequently fallen back to a 119-day supply.  During this period, Russia invaded Ukraine in February 2022, raising concerns over exportable wheat supplies from the critical Black Sea wheat producing region. 

As world wheat supplies tightened, cash wheat prices doubled from the summer of 2020 to the fall of 2021, from just under $4 per bushel to $8, then to over $12 in the months after the invasion. Prices have since fallen back to levels last seen in the summer of 2021 (the early stages of the 2021/22 marketing year). This price retracement has occurred even though world days of use on hand at the end of the marketing year are lower, and the conflict in Ukraine continues. 

Figure 1. Texas Cash Wheat Prices, weekly

A key factor behind prices moving lower despite tightening world wheat fundamentals is the continued movement of wheat from the Black Sea region. In the marketing year prior to the invasion, Russia and Ukraine exported 56 mmt of wheat, 28% of world wheat exports. Current estimates for the 2023/24 marketing year are for combined exports of 60 mmt, 29% of the world total. 

This export total is a result of record wheat exports from Russia and a 50% reduction in exports from Ukraine. Russia has gone from virtually no wheat exports in the 2000/2001 marketing year to a projected 49 mmt in the 2023/2024 marketing year. (Figure 2)  Export capability comes from a 50% increase in production over the last 10 years. Further, Russia has increased production by 10 million harvested acres since 2013, and increased yields from 33 to 47 bushels per acre. 

Figure 2. Russia Wheat Production, Exports, Consumption, and Ending Stocks

Russian wheat supplies are of increased importance to the world wheat market. Russia’s wheat exports have increased against a backdrop of tightening world wheat fundamentals. Wheat prices have fallen as wheat exports continue from the Black Sea region, even though the supply and demand situation for world wheat is tighter than before the Russian invasion of Ukraine. In the current world wheat supply and demand environment, any substantial limitation or reduction in exportable wheat supplies from Russia (e.g., due to reduced wheat production, export policy, or geopolitical forces) would likely result in a significantly amplified price response. 

References

USDA, Foreign Agricultural Service, Production, Supply, Distribution Database. Accessed October 5, 2023, https://apps.fas.usda.gov/psdonline/app/index.html#/app/home.

USDA, Office of the Chief Economist, World Agricultural Supply and Demand Estimates, September 12, 2023. 

---

Welch, J. Mark. “Russian Wheat Production and World Wheat Market Fundamentals.” Southern Ag Today 3(42.1). October 16, 2023. Permalink

The size of global soybean stocks is an important factor in determining global soybean prices, but the quantity held by different countries and annual use are also relevant to the market. In the 2018/19 marketing year (during the U.S.-China trade war), the U.S held 22% of global stocks compared to China (16%), Brazil (29%), Argentina (25%), and the rest of the world (8%). Since then, China has more than doubled its share of global stocks, while the U.S. ending stock has dropped to the lowest level in eight years. At the end of the 2023/24 marketing year, the U.S. is projected to hold 5% of global soybean stocks compared to China (33%), Brazil (32%), Argentina (21%), and the rest of the world (9%).  Even though U.S. ending stocks are projected to be tight for the current marketing year, global stocks are projected to be an all-time record (Figure 1). 

Figure 1. Projected Global Soybean Ending Stocks, by Country, at the End of the United States Marketing Year, 2012/2013 to 2023/2024

This analysis can be taken one step further by incorporating usage.  Days-on-hand can be used to estimate a country’s stocks relative to annual use (domestic consumption + exports). China is projected to have 120 days of soybeans on hand for the past and current marketing year (Table 1).  World days-on-hand are projected at 114 days, the second highest in the past 12 years. Argentina’s soybean days-on-hand are projected to increase from a 10-year low of 159 days to a high of 197 days, by the end of the current marketing year. Due to the abundance of global stocks and the projected days-on-hand, it may be challenging for U.S. soybean exports to achieve the current USDA projection of 48.7 million metric tons (MT). This would result in increased U.S. ending stock. Additional factors such as exchange rates, discussed in a prior Southern Ag Today article, will also play an important role in U.S. exports and ending stocks.

Based on current USDA projections, further weakness in soybean futures prices seems likely, unless a weather disruption in South America leads to reductions in projected production. A bounce back in Argentina’s drought reduced production (projected production was halved by last year’s drought) seems likely and Brazil is forecast to produce another record crop. January 2024 soybean futures have already decreased $1.49/bu since the July 24, 2023, high of $14.41/bu. A key level of support for the January contract is $12.60/bu-$12.80/bu. If prices fall below $12.60/bu, it is possible that prices test the contract low of $11.41/bu from May 31, 2023. For producers concerned with a decline in futures prices for unpriced soybeans that will be held in storage, an $11.70 put option could be purchased for 6 cents. This is cheap protection based on the large amount of uncertainty in the current South American soybean production year. 

Table 1. Soybean Days-on-Hand by Country, 2012/2013 to 2023/2024

References and Resources

Barchart.com. https://www.barchart.com/futures/grains?viewName=main

USDA September WASDE. https://www.usda.gov/oce/commodity/wasde/wasde0923.pdf

---

Smith, Aaron. “Who’s Holding Global Soybean Stocks?” Southern Ag Today 3(41.1). October 9, 2023. Permalink