Internal grain movement in the U.S. this fall is not what many analysts had expected.
Farmers have adequate storage in their own facilities and commercial terminals were nearly empty going into the harvest season.
Combine these factors with heavy forward bookings at increased revenue levels, and there is little reason for any grain movement at the present time.
This lack of country movement has caused internal grain buyers and processors to push for deliveries sooner than expected, creating favorable cash grain values. It is possible the next wave of cash grain will not hit the market until late winter, just prior to the spring planting season.
Trade is hoping that future supply and demand reports will give us an answer on where the large reduction in corn demand in past reports has come from.
The two most popular explanations are from increased corn by-product use in feed rations, and a possible miscalculation on last year’s production.
Skeptics claim these only account for about half of the reductions to corn use we have seen since August. It is quite possible the remainder of the unused corn bushels will be displaced by cheaper feed grains in livestock production, such as wheat.
Several economists believe China’s corn needs will keep U.S. grain values elevated, possibly for the next several years.
In the next 12 months, China is expected to import between 7 and 10 million tons of corn. By the year 2015, China’s corn imports are forecast to reach 15 million tons.
These import needs are based off current corn production in China though, which is increasing at a rapid pace due to improved farming practices.
Chinese farmers are using better seeds and increasing fertilizer usage, which is elevating their corn yields. It is quite possible China will be able to satisfy this demand growth with relatively few corn imports.
So much interest in the export market has focused on potential Chinese corn bookings, trade has mostly overlooked the fact that China’s soybean bookings are slowing.
Several buyers have been passing on U.S. soybean offerings in the world market, and it is believed this is all due to price. While price is a factor, quality is also becoming an issue.
Processors claim this year’s soybean crop is lower in protein than normal, which is affecting what a buyer is willing to pay for U.S. offerings. If the U.S. wants to be competitive in the world market on soybeans, this change in quality means they actually need to be cheaper than other sources.
Karl Setzer is a commodity trading advisor and market analyst at MaxYield Cooperative. He can contacted at “mailto:email@example.com”>firstname.lastname@example.org.
he production of non-approved genetically engineered corn in the United States could have longer lasting implications for that commodity. We have seen buyers pass over our offerings in the world market due to this production, same as they have in the past. Some buyers are even passing on our corn by products, such as distiller grains because of this situation. This rejection may only be temporary though, as buyers will change their opinions if U.S. corn becomes their most affordable choice in the world market.
The United Nations Food and Agriculture Organization believe the world grain supply will remain tight throughout the next year despite increased output. World cereal grain production is forecast to rise 3.7% this coming year, and coarse grain production, including corn, is forecast to rise 3.3%. These increases are not enough to satisfy increased demand though, especially in developing countries. The group projects world food grain import costs will reach a record $1.3 trillion in 2011.
Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative. His commentary and market analysis is available daily on radio, in newsprint and on the Internet at HYPERLINK ““http://www.MaxYieldCooperative.com”>www.MaxYieldCooperative.com“ www.MaxYieldCooperative.com. The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.
MaxYield Cooperative, P.O. Box 49, West Bend, IA 50597. Phone: 1-800-383-0003; email: email@example.com.
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