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KARL SETZER

By Staff | Dec 9, 2011

We are now at a time of the marketing year that can become one of the quietest for fresh news.

This period is termed the “winter doldrums.” The next big release of fresh news will come in January when the USDA releases its final old crop yield estimates.

Holiday breaks also tend to impact the release of fresh news, as well as the volume of traders that participate in daily sessions.

These factors do not necessarily mean quiet trade though, as the lower the volume the easier it is to manipulate the market.

According to data from the Energy Information Administration, U.S. ethanol production has likely plateaued.

The firm claims the United States has 209 operational ethanol plants with a daily capacity of 929,000 barrels of production.

For the year, this equates to an estimated 14.2 billion gallons. Expansion has slowed in the ethanol industry though, which is a good sign as the United States is right at the edge of over-production on ethanol.

Trade is already showing interest in what we will see for new crop balance sheets which will not be released until the May supply and demand report.

While the release of this is several months away, trade believes we will see larger new crop carryout estimates than what we will see this year.

The competition U.S. corn has seen in the world market from cheap feed wheat may actually increase later this marketing year.

Australia is increasing its wheat harvest activity, and so far, it appears as though the protein content of this year’s crop is down from normal.

This means more of this wheat will likely make its way into the world feed grain market.

Feed wheat is already at a $65 per ton discount to corn, which is greatly reducing demand for U.S. corn offerings in the world market.

The United States may be seeing the end of the Urban Sprawl movement that has reduced available farm ground in recent years.

Many acres of U.S. farmland were bought over the past several years and planned for development, mainly housing. Given the recent housing market reversal, much of this ground has sat idle and was never developed at all.

Farmers are now buying this land back to bring back into row crop production, usually at a lower value than the initial sale.

Work continues to be done on the next Farm Bill, but progress is very slow.

This is concerning to some economists, as they believe the inability to make compromises could end up causing broad cuts to much needed programs.

Lawmakers were told they need to remove close to $23 billion from ag spending, but so far, fewer than $15 billion in cuts have been agreed upon.

A shift is taking place in global grain production that could impact grain trade for the foreseeable future.

China has now announced it will plant 3.9 percent more corn this year, but 10.5 percent fewer soybeans.

This is from the huge soybean crop that is expected out of South America, and how those countries are on their way to being the world’s primary origination point for all soybean needs.

This shift means the United States may now only need to produce enough soybeans to cover domestic needs, leaving more acres available for corn production.

Karl Setzer is a commodity trading advisor and market analyst at MaxYield Cooperative. He can contacted at ksetzer@maxyieldcooperative.com.

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