The U.S. harvest season has kicked off at a quick pace, with farmers harvesting 65% of the nation’s second-largest corn crop in history by October 20, surpassing the five-year average of 52% according to USDA data. Additionally, the harvest of their record-large soybean crop was 81% complete by the same date, marking the fastest pace since 2012 when a significant drought constrained production.
However, ample global supplies have meant that U.S. farmers continue to be plagued by low grain prices. South America saw bumper crops in their 2023/24 crop season, with Brazil harvesting its second-largest soybean crop in history, exceeding 150 million metric tons based on USDA data. Argentina also made a recovery from last season’s drought, yielding around 48 million tons of soybeans compared to 25 million tons in the previous season. Meanwhile, sluggish Chinese demand for corn supplies from Brazil and the U.S. have also exerted pressure on corn prices.
Compounding the issue, many U.S. farmers still have leftover grain from the previous year’s record corn crop, as they hesitated to sell due to low prices. With dry weather accelerating this year’s harvests, grain handlers are now forced to make the choice of storing their grains outside of storage bins, or otherwise offload their stocks at prices lower than production costs.
The current low U.S. grain prices, however, have driven a pick up in U.S. grain export sales. Total commitments for U.S. corn and wheat export sales for the 2024/25 marketing year are now significantly outpacing last year, with corn export sales totalling 3.62 million tons for the week ending October 17, bringing the total to 23.48 million tons for the marketing year. This represents a notable increase of 34% or 5.95 million tons compared to the same time last year. Meanwhile, U.S. wheat export sales have reached 13.09 million tons for the 2024/25 marketing year, an increase of 18% or 2.00 million tons compared with a year earlier.
On 21 Oct, the USDA also confirmed a total of 380,000 tons of U.S. soybean sales and 500,000 tons of corn export sales, news that further confirmed buying interest after corn and soybean futures hit multi-week lows in the previous week.
Notably, low prices are not the only driving factor behind the surge in export activity. U.S. grain merchants are also racing to ship out their record-large soybean harvest ahead of the upcoming presidential election, amid fears of renewed trade tensions with top importer China.
In 2018, the Trump administration launched a trade war with China. In response, China imposed a 25% tariff on U.S. soybeans, causing U.S. soybean exports to China to plunge to around half their usual levels in 2018. The memory of this has given rise to an urgency to ship volumes ahead of the U.S. election, as reflected in current U.S. soybean export premiums which have reached their highest level in 14 months. In fact, nearly 2.5 million tons of U.S. soybeans were inspected for export in the week ending October 17, including almost 1.7 million tons destined for China—the largest volume in a year.
While the aforementioned factors show favourable conditions for U.S. grain exports in the short term, there are some headwinds on the horizon which could hinder grain exports from the country. Grain shipments from the U.S. Gulf are currently bottlenecked due to unusually low water levels in the Mississippi River, which have persisted for three consecutive years. This situation has forced barge companies to limit the amount of grain cargo they can carry to avoid the risk of barges getting stuck.
Additionally, warehouses in China are overflowing with grain as a deepening economic crisis takes hold. The slowdown in China’s economy, coupled with the ongoing challenges in their property market, has severely impacted consumer confidence. As a result, budget-conscious households have cut back on meat consumption and dining out, reducing the demand for crops needed to feed the country’s massive pig herd. While China has recently unveiled a series of sweeping financial and fiscal measures to support its slowing economy, it may still take time for measures to be implemented, and for any positive effects to show.
Although there has been an increase in U.S. soybean shipments to China, the volumes remain significantly lower compared to those from top producer Brazil. Brazilian soybeans constituted the majority of the nearly record 11.37 million tons of oilseed that arrived in China in September, as favourable crushing margins encouraged purchasing. Depending on the outcome of the U.S. elections, China’s preference for Brazilian soybeans could continue for food security reasons.
While the U.S. grain market faces promising export opportunities due to a record harvest and competitive pricing, logistical difficulties and demand uncertainties loom on the horizon. The ability of U.S. grain suppliers to overcome these challenges may only become clear in the coming months, as we observe how the U.S. grain shipments unfold.
