The USDA’s November crop report did not come as a bullish surprise — exactly quite the opposite. As I’ve said many times before in this column, the cure for high prices is high prices — and this market has been no different. Keep any commodity too high for too long and people find a way to use something else or to grow more of it, and that is exactly what is taking place in corn and soybeans.

The bigger concern in soybeans is not the fact that we’ve cut domestic usage at all. We are, however, being undercut pricewise by Brazil in the export market. A year ago soybean exports to China were screaming. We still are exporting beans to China — but not at the magnitude we were nor at the magnitude that is happening with beans coming out of Brazil.

In the November report, the USDA estimated that Brazil’s soybean exports this year would increase to 38 million metric tons versus last year’s 29.95. That is one huge jump! At the same time, soybean imports for China were left unchanged at 56.5 million metric tons. Do the math. Most of Brazil’s beans are going to China and thus they are getting a bigger share of the market now than we are.

Good News

There was some good news in the November report. Chinese corn imports are now pegged for this year at 3 million metric tons versus an earlier estimate of 2 million metric tons, the highest in at least 30 years. Almost everyone in the world knows that China needs our corn, but they keep emphatically saying that they are not going to buy it. While 3 million is the right trend, it’s still a relatively small quantity (36 bushels per metric ton).

But with that said and even though it’s not enough corn export to change significantly the balance sheet for U.S. corn farmers, it is a trend that possibly the Chinese are going to be stepping up to the plate for more corn. Let’s keep our fingers crossed!

What’s the Trend?

Commodity production and pricing is a cyclical business. It always has been and always will be. Bad times are followed by good times and good times are followed by bad times. This will never change!

The last two years have been spectacular for corn and soybean producers as well as cotton producers if they had a crop. The trend is down and everyone needs to adjust his thinking cap. Corn acres this coming spring will shoot sharply higher. I’m still in the camp that the corn and soybean market peaked in September and both will likely bottom in the July/August timeframe. These are still high prices and any rallies should be used to take advantage of to keep pushing sales for next year.

breport@brockreport.com