The attaché pegged Argentina’s 2023/24 wheat harvest at 15.40 million tonnes. While thanks to El Nino rains it was a significant improvement over the drought-stricken crop of 12 million tonnes the year before, it was well short of the 22.15 million harvested in 2021/22.

Wheat exports also dramatically improved, going from 3.66 million tonnes in 2022/23 to now 10.20 million, according to the Buenos Aires desk. But again, short of the 16 million tonnes in 2021/22. Meanwhile, 2023/24 ending stocks dropped to 1.62 million tonnes from the 3.32 million the previous year. Those for 2021/22 were 1.93 million tonnes.

The USDA attaché placed Argentina’s 2023/24 corn production at 57 million tonnes, up sharply from the 35 million the previous year due to the El Nino. This year’s output also exceeded the 52 million in 2021/22.

The country’s corn exports tallied 41 million tonnes in 2023/24 compared to the 23.40 million in 2022/23, but short of the 38.85 million in 2021/22.

The attaché forecast corn ending stocks for 2023/24 at 2.62 million tonnes, from the previous year’s 1.41 million, but still lower than the 4.30 million in 2021/22.

Going into the USDA’s World Agricultural Supply and Demand Estimates on Feb. 8, the average trade guess for Argentina’s corn crop came in at 55.59 million tonnes, up 590,000 from the department’s January report. However, there has been some consternation within the markets that the recent hot spell in Argentina might have eroded potential corn yields with the crop being in a critical stage of its development.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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In contrast, consistent soybean sales since Monday have provided some support to the market.

“This morning we got another sale of soybeans to an unknown destination, that could be China,” Reilly said.

However, the future of the trade deal between the U.S. and China is uncertain, which has also weighed on the market. On Tuesday, President Donald Trump said phase one of the trade deal with China “could happen soon” but, if not, he may raise tariffs “very substantially.”

This week’s crop progress report from the U.S. Department of Agriculture (USDA) showed harvest activity proceeded at a slower rate than the CBOT anticipated.

“Weather will improve next week for the U.S. in general, and it’ll probably significantly improve harvest,” Reilly said.

“Producers will be able to pull more beans and corn out of the ground.”

The crop progress report also reduced the winter wheat quality rating by three points, which “was a surprise as well.” However, he said, “It’s still early.”

Reilly expected the reduced quality rating to be widely ignored, as “wheat is still expected to move into dormancy at a normal pace, and the bulk of development will be when it re-emerges in the spring.”

— Marlo Glass reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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U.S. soybean futures also declined and wheat recorded a fifth straight weekly decline, despite ending higher on the day.

Chicago Board of Trade May corn futures settled down one cent at $3.64-1/4 per bushel after dipping to a contract low of $3.62-1/4, the lowest price for a most-active contract since Nov. 21 (all figures US$).

CBOT May soybeans ended down 6-3/4 cents at $8.95-3/4 a bushel while May wheat finished up 1-1/4 cents at $4.39-1/2 a bushel.

Corn futures fell after USDA in a monthly report raised its forecast of U.S. corn stocks remaining at the end of the 2018-19 marketing year to 1.835 billion bushels, topping the highest in a range of trade expectations.

The projected increase reflected a drop in the government’s estimate of U.S. corn exports to 2.375 billion bushels, down 75 million from USDA’s previous monthly report.

However, the market was underpinned by the fact that corn futures have already fallen sharply in the last two weeks.

“The big change in the exports is really disappointing for the corn. But here we are, barely lower, when it could be a dime lower,” said Jack Scoville, analyst with the Price Group.

Soybean futures sagged although USDA’s changes to its U.S. and global ending stocks forecasts were roughly in line with analyst expectations.

USDA pegged Brazil’s soybean crop at 116.5 million tonnes, down from its February estimate of 117 million but above an average of analyst estimates for 115.7 million.

“There were some people thinking they would slash Brazil’s bean production a little more than they did,” said Brian Hoops, president of Midwest Marketing Solutions.

USDA confirmed that China bought 664,000 tonnes of U.S. soybeans, China’s first purchase of U.S. supplies since promising last month to buy 10 million tonnes as part of trade talks. News of the sale had lifted futures on Thursday.

CBOT wheat closed higher in a light bounce after most months hit contract lows.

As with corn, USDA cut its forecast of U.S. 2018-19 wheat exports and raised its forecast of wheat ending stocks to 1.055 billion bushels, from 1.010 billion last month.

“Bigger wheat crops out of Australia and Russia are going to cut into our exports, so USDA was certainly justified,” Hoops said.

For the week, CBOT May wheat fell 17-3/4 cents a bushel or nearly four per cent, its fifth straight drop. May corn fell about two per cent for the week and May soy fell 1.7 per cent, its biggest weekly drop since December.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago; additional reporting by Gus Trompiz in Paris and Colin Packham in Sydney.

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A trade delegation from Minnesota, one of the largest U.S. agriculture states, vowed to carry on with its planned visit to Cuba next week. “We’re going to continue to beat the drum and let them (the Trump administration) know that trade is good for agriculture,” said Kevin Paap, a farmer in the delegation.

Trump signed a presidential directive on Friday rolling back parts of former President Barack Obama’s opening to the Communist-ruled country after a 2014 diplomatic breakthrough between the two former Cold War foes.

Farm groups saw the move as a step backward in what had been an improving trade relationship between the two countries which are just 145 km apart, even though agriculture is not directly targeted.

U.S. law exempts food from a decades-old embargo on U.S. trade with Cuba, but cumbersome rules on how transactions were executed have made deals difficult and costly.

Since Obama’s detente, substantial headway has been made, however, with shipments of U.S. corn and soybeans to Cuba soaring 420 per cent in 2016 from a year earlier to 268,360 tonnes, U.S. Department of Agriculture data shows.

Through the first four months of 2017, total shipments of U.S. grain and soy were 142,860 tonnes, up from 49,090 tonnes during the same period of 2016.

While the quantities are dwarfed by total U.S. exports — nearly 56 million tonnes of corn alone last year — the added volumes were welcome as farmers face a fourth year of languishing grain prices and crimped incomes.

“At a time when the farm economy is struggling, we ask our leaders in Washington not to close doors on market opportunities for American agriculture,” Wesley Spurlock, president of the National Corn Growers Association, said in a statement.

The group sees an opportunity for US$125 million more a year in trade to Cuba.

Trump’s move could cut off near-term sales and stymie economic development that would drive longer-term demand growth, said Tom Sleight, president of the U.S. Grains Council, a grain trade development organization, in a statement.

“Neither of those outcomes is favourable for the U.S. ag sector or the Cuban people,” he added.

Paap said the U.S. should be doing more to encourage exports.

“It’s frustrating because we’ve made some advances and built those relationships,” he said.

— Karl Plume reports on agriculture and agribusiness for Reuters from Chicago. Additional reporting for Reuters by Michael Hirtzer in Chicago.

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Mexican charge d’affaires Eleazar Velasco said Brazil is uniquely positioned to expand agricultural commodity sales to Mexico if trade with the U.S. is disrupted because it is closer than other potential suppliers like Australia.

“The United States unilaterally wants to change the established rules of the game,” Velasco told Reuters. “This will evidently lead us to rebalance our trade relations.”

Mexican Agriculture Secretary Jose Calzada was due to visit Brazil last week but had to postpone his trip until March due to scheduling issues, Velasco said.

Calzada will bring Mexican food industry executives to do deals with Brazilian exporters, the diplomat said. The trip is part of a drive to lessen dependence on U.S. exports as President Donald Trump threatens to upend long-standing free trade between the two countries.

Calzada told Reuters in an interview last week that Mexico could cut tariffs on South America products, if needed.

Mexico has relied on U.S. yellow corn imports under the North American Free Trade Agreement. With US$2.3 billion of imports in 2016, Mexico is by far the biggest foreign buyer, and U.S. farmers have lobbied Trump not to alter their trade.

“Corn is the main staple for the Mexican population. If the rules are changed we will have to buy from others, and Brazil is in the best position,” Velasco said.

Brazil is expanding its corn production and the 2016-17 harvest is expected to jump to 93 million tonnes from 71 million tonnes in the previous harvest. Consultancy Agroconsult estimates Brazil’s corn exports will double to 28 million tonnes, with neighboring Argentina as its main competitor.

Mexico will also be looking to buy soy from Brazil, the world’s largest exporter of the bean, even though Mexican imports are small, Velasco said.

Tensions with the Trump administration injected new energy into negotiations between Mexico and Brazil to free up their trade, 51 per cent of which is made up of cars and auto parts, but could now see an expansion of agricultural goods.

— Reporting for Reuters by Anthony Boadle.

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The move threatens to push U.S. prices down sharply in a market that has already fallen by a quarter since June.

In what could be the first bulk exports in a decade, the government has issued permits to two state-owned companies, top grains trader COFCO and major processor and trader Beidahuang, allowing them to sell corn abroad, said China-based sources who asked to remain anonymous because they were not authorized to speak to the media.

A spokeswoman for China’s commerce ministry said the permits were not their responsibility and directed questions to the state planner, the National Development and Reform Commission (NDRC). The NDRC did not respond to requests for comment.

Unleashing a large amount of corn onto the world market comes at a time when global farmers are growing a record crop.

That could hurt corn growers in major exporters in the U.S. and Brazil, although more supplies and lower prices would help cut costs for major users in the livestock, ethanol and corn syrup markets.

— Reporting for Reuters by Domininque Patton in Beijing.

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Concerns over the possibility of tougher limits on Russia’s foreign sales of wheat sent global prices to a one-month high earlier this week.

However, the agriculture ministry proposed removing or cutting the export tax on wheat, while imposing one on barley and corn.

“They will not change anything,” one industry source said on Friday after a meeting with Deputy Prime Minister Arkady Dvorkovich, who is in charge of agriculture.

Dvorkovich’s spokeswoman, Aliya Samigullina, told Reuters that no decision had been made at the meeting.

Any decision to reduce the tax would have been a blow for other exporters, including the European Union, the U.S. and Argentina, a German trader said.

“This would keep Russian competition in wheat export markets high at a time when falling oil prices have reduced purchasing power in some of the biggest Middle East grain importing countries,” he said.

Russia could yet consider a downgrade of the wheat export tax and will decide on the matter on Feb. 3, Dmitry Rylko, the head of agriculture consultancy IKAR said.

But officials are unlikely to approve this idea, three sources with knowledge of the matter said.

Russia has a floating tax on wheat exports; the formula is set at 50 per cent of the customs price minus 6,500 rubles (C$121) per tonne but not less than 10 rubles per tonne.

Dvorkovich said earlier on Friday that he saw no need to change the existing wheat tax for now unless there were extraordinary reasons to do so.

Russia originally imposed the wheat export tax a year ago when the ruble’s fall boosted domestic grain prices.

Since then, anxiety over domestic prices has eased, said Andrey Sizov, the head of SovEcon agriculture consultancy.

The government can sell some grain from domestic stocks, if it needs to cool prices without changing export regulation, one trader said.

— Reporting for Reuters by Polina Devitt and Michael Hogan.

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As recently as Nov. 4, crude oil prices were $48.64 a barrel, but since then have fallen to US$37.86, as of Wednesday’s opening.

Some analysts seem to stick with the adage that “people gotta eat,” which will slowly but surely enable markets to chew through massive world supplies of grains and oilseeds — and the knowledge that oil prices were under US$10 a barrel during the early 2000s, but the world kept turning.

On the other side of the coin, this recent drop in crude comes as the U.S. is still recovering from the recession of 2008 and is already suffering from export problems. The strength of the U.S. dollar has made sales of corn and wheat too expensive in the minds of many international buyers, who have simply turned to South America and the Black Sea region for cheaper supplies.

There are also widespread expectations that the U.S. Federal Reserve will hike interest rates in that country next week.

It’s all adding up to something that could prompt another recession in the U.S., according to Errol Anderson of ProMarket Communications in Calgary.

“The risks to me are high; even though the Canadian dollar may be going down to 72.5 (U.S. cents), there is sort of a day of reckoning coming in the U.S.”

The sudden drop in oil over the past few days has already had noticeable effects, he said.

“Yesterday (Monday) soyoil dropped and the cattle board dropped, (after) crude oil dropped,” he said. “Crude oil is the psychological leader.”

If crude continues its descent, Anderson said, the situation will just get worse.

“Products like soyoil and palm oil will actually go down even though we have the El Nino effect. Because once we get improved weather conditions — the fundamentals will fall back further, which is a risk for canola too,” he said.

The president of Chicago-based Ag Resource Co. agrees commodities will remain under pressure.

Overproduction is already making life difficult for stakeholders, Dan Basse said, adding that the world needs to cut 20 million acres of grain production in the next three years just to balance things out.

“If they don’t, it gets even worse,” he said.

As for the big picture, Basse said, we’ve been here before.

“Back in the early 2000s, oil was trading for under $10 a barrel, so some of us would argue the price of oil is still relatively expensive,” he said, adding weak prices and low margins are likely here for a while.

“Due to the investments that were put in place during the commodity supercycle which lasted from 2005 to 2013, it’s not (a case of) slowing demand; it’s just overproduction.”

While the low price of oil also makes corn-based ethanol less attractive, Basse said that shouldn’t affect its usage.

“The U.S. has mandates. They just raised that to 14.5 billion gallons in 2016. So it (ethanol) is mandated regardless of the price,” he pointed out.

For Anderson, the signs point to a conflagration of economic factors that could send equity markets and commodities tumbling even more.

“It could hit a crossroads before Christmas,” he said. “It will be interesting to see what happens next week.”

The situation may change if the Fed rethinks its strategy, he added.

“Crude is having a big impact on U.S. stock markets, so it may cause the U.S. Federal Reserve to back away from the rate hike.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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President-elect Mauricio Macri won the election last Sunday on a platform of wholesale change. He has vowed to end interventionist measures such as these taxes that have hobbled growth in Latin America’s third largest economy.

“The wheat and corn taxes will be eliminated from the first day, in line with what we promised,” Buryaile was cited as saying by Clarin.

“The tax on soy will drop by five per cent from the start of Mauricio Macri’s term,” he added. “What we are examining is which methodology we will use.”

For years growers in the world’s No. 3 soybean exporter have been stung by a 35 per cent tax on all international shipments.

The country collects a 23 per cent export tax on wheat and a 20 per cent levy on corn shipments.

By some estimates, Argentina will have doubled wheat shipments and surpassed Russia and Brazil as a corn exporter by the end of Macri’s four-year term, as the abandonment of years-long trade restraints unleashes the full potential of the country’s vast Pampas farm belt.

— Reporting for Reuters by Walter Bianchi and Sarah Marsh.

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In its latest move to boost a sector that has struggled with the world’s most expensive domestic corn, the government is preparing to slash state support prices by another 10 per cent to 1,800 yuan (C$376) per tonne for 2016-17, according to three sources. That would follow previously announced cuts for the crop year that began in October.

Cheaper local prices could sap appetite for imports from processors in the world’s No. 2 corn consumer behind the U.S., a move that could weigh on world prices and hurt corn exporters from the Americas to Ukraine.

Grain processors make products ranging from animal feed to sweeteners and ethanol.

A cut in prices could also stifle demand for corn substitutes such as sorghum, distillers grains (DDGS) and barley, which saw record Chinese imports of over 30 million tonnes in 2014-15.

“The government has to reduce the price, given its massive stocks and as domestic corn prices are still much more expensive than imports,” said Qian Jianjun, an analyst with Beijing Orient Agri-business Consultant Co. Ltd.

Beijing could also offer freight subsidies to animal feed mills in the south of the country that ship corn from the northeastern growing belt, two of the sources said. They did not specify when this could happen.

The finance ministry as well as the National Development and Reform Commission did not respond to requests for comment.

The three sources, who have direct knowledge of the matter, said Beijing may announce the new corn price cuts early next year before planting starts in March.

“Imports of corn and corn substitutes could fall more than we earlier expected, dropping 50 per cent or even more from last year,” said an analyst with an official think-tank.

Beijing has been forced to gradually pull away from its controversial policy of supporting farmers through buying corn for national reserves, as stocks are expected to have ballooned to 200 million tonnes by April next year — equivalent to over a year of the country’s consumption.

Higher local prices driven by the stockpiling mean that mills and refiners have lost cash and racked up debt, with as much as 60 percent of China’s processing capacity shut over the past three years, according to refinery sources.

Lifeline?

In an earlier step to offer refiners a lifeline, Beijing in September cut state support prices for the first time since 2008. Corn refineries in the northeast have also been offered subsidies for buying local grain.

Those steps helped narrow the gap between domestic and imported grain prices to a difference of around 20 per cent, but have not been enough to erode stocks or encourage broad investment from the animal feedstock or sweetener sectors.

Although at least one company has taken advantage of cheaper raw material prices: Global Bio-chem Technology Group Co., Asia’s largest corn refiner, restarted its idled corn sweetener and lysine plants last week, an official told Reuters.

The lysine plant in the northeast province of Jilin will reach full capacity of 500,000 tonnes per year by the end of November, said the official, who declined to be identified as he was not authorized to speak with media. Lysine is an animal feed ingredient.

However, tepid demand for animal feed will stymie efforts to boost many corn processors. Some poultry farmers’ flocks are recovering from bird flu and China’s culling of its hog herds has depleted stocks.

Meng Jinhui, an analyst with COFCO Futures Co. Ltd., said corn demand would not return to the record highs seen in 2012 of 120 million tonnes “any time soon.”

— Reporting for Reuters by Niu Shuping and David Stanway in Beijing.

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