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CARL SETZER

By Staff | Jan 20, 2012

The U.S. corn carryout in the January supply and demand report came out at 846 million bushels, 13 percent more than trade was expecting.

The U.S. corn yield increased one-half bushel per acre, putting the national average at 147.2 bushels per acre and total crop size at 12.36 billion bushels.

The USDA did increase corn exports by 50 mb, but this was not enough to compensate for the increase in production.

Ethanol demand on corn was left unchanged at 5 bb.

The U.S. soybean numbers were equally negative for the market, with a carryout of 275 mb, 18 percentg greater than expectations.

The U.S. soybean yield only increased two-tenths of a bushel, which adjusted the crop’s size to 3.056 bb, 10 mb more than previously reported.

The USDA cut soybean crushing by 10 mb and exports by 25 mb, though giving us the higher ending stocks.

Global grain stocks were also negative, as even though some reductions were made to South American crops from recent drought conditions, others had yields and crop sizes increased.

The greatest increase was Ukraine’s corn crop, which can easily find its way into the Asian market.

The quarterly grain stocks data was also released and offered little market support. As of Dec. 1, the United States was holding 9.64 bb of corn in storage, 250 mb more than expected.

Soybean stocks on that date totaled 2.36 bb, 40 mb more than predicted. Soybeans were split half and half between on- and off-farm storage, while nearly two-thirds of the corn was being held on farms.

The global economy remains one of the greatest factors in today’s commodity market, even with production concerns in South America.

Indications are the U.S. economy is getting stronger, and with issues continuing in the European Union, it is bringing investors to the U.S. dollar.

Unfortunately this is negative for the commodity market, as it makes our grains more expensive. Economists are warning us that if the EU economy would collapse, it would devastate all markets, which is adding to today’s volatility.

In as little as six weeks, planting will be underway in the southern Corn Belt. As we approach this season, more emphasis is placed on weather outlooks. A large area of the western Corn Belt and Plains remains in a drought, and is in desperate need of moisture for any chance of raising normal crops. At the same time we will start to see an addition of risk premium to commodity values.

As we approach the spring planting season, more emphasis will also be placed on prospective plantings. The most interest is on corn, as acres of that grain could fall between 94 and 95 million.

This is from the fact that economics for corn are still more favorable than those for soybeans, as is the potential for global demand.

Spring weather will be a major influence on actual plantings, as years with dry springs tend to see elevated corn acres.

An indication of potential new crop acres came from the American Farm Bureau Federation’s annual meeting, where a poll showed participants will increase corn plantings by 6 percent, soybeans by 2.5 percent, and wheat by 7.1 percent.

The majority of these acres are expected to shift out of cotton.

Survey results also indicate a large percentage of farmers expect their income to increase this year, but not enough to compensate for elevated costs, mainly fuel, seed and chemicals.

Income is predicted to increase 5 percent this year, while farm costs could rise as much as 19 percent, according to survey results.

The USDA will release its initial income projections in February.

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

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