There is little doubt that at least some price rationing has taken place in the U.S. grain market, especially on corn.
Price rationing is when commodity values reach a level that slows demand.
U.S. corn exports for this marketing year are now projected at 1.6 billion bushels, the lowest volume in the past nine years.
Domestic corn demand has been solid enough to offset a portion of these poor export projections, but it is doubtful they can prevent a building of ending stocks at the end of the marketing year.
Trade is quick to point out that while corn exports are in fact slowing, demand for corn products is rising.
One of the most well followed corn by-products that are used is dried distiller’s grains. Data that was published by the firm F.C. Stone recently shows just how much corn and soybean meal usage can be off-set by using DDGs in specific rations.
For beef, the use of one pound of DDG will replace 1.2 pounds of corn only. In hogs and poultry one pound of DDGs displaces roughly one-half pound of each corn and soy meal.
The United States is seeing heavier competition in the world market for corn sales.
While it’s a cheap feed, wheat has long been an issue. Now the U.S. is combating cheaper corn as well.
The sources of this are Ukraine and Argentina, as both countries are offering corn valued well below that of the United States.
The cost of shipping this corn into the Asian market also saves buyers money, as the distance is less than from the United States.
Before long, the United States will also see heavier competition for soybean sales, as well.
The South American planting season was early this year, and field scouts claim the crop is maturing about a month ahead of schedule.
This means South America could have soybeans for the global market in early January, a time when the United States is normally the primary origination point.
An early harvest also means much of South America’s soybean crop will miss any stress from a La Nina weather event and could lead to increased double cropping with corn.
U.S. soybean exports are already down almost 150 million bushels from a year ago at this time as buyers are using every alternative to U.S. soybean purchases they can come up with.
This is not just from price, but from concerns over the lower protein of this year’s soybean crop in the United States.
Many buyers also over-booked soybeans last year and can be choosier over bookings this year due to larger inventories.
Chinese officials have revised their soybean import estimates, and shocked trade as they did.
China is now forecasting soybean imports for this marketing year at 52 million metric tons, down 2 million from last year.
If correct, this would be the first decline in Chinese soybean imports since 2004. What is more of a factor is where the soybeans come from, as the United States could miss a large portion of this business.
We are at a time of the year when more interest is placed on acres for the upcoming production season.
The focal point of this is how many acres may exit the Conservation Reserve Program and return to crop production.
There are currently 32 million acres in C.R.P., but it is believed this will decline to just 22 million by the year 2013.
While these additional acres will in fact give the U.S. the potential for larger crops, grain usage is also forecasted to rise, and these acres may do little more than hold grain reserves at a steady level.
Karl Setzer is a commodity trading advisor and analyst at MaxYield Cooperative. He can be contacted at email@example.com.
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