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KARL SETZER

By Staff | Apr 20, 2012

The corn numbers in the USDA’s April supply and demand report surprised trade in the fact they were all left unchanged. Corn carryout held steady at 801 million bushels while trade had been expecting close to 90 mb less.

This is from the fact more wheat is finding its way into the world feed grain supply. The USDA is now estimating world wheat feeding will increase to 270 mb this marketing year.

USDA did make adjustments to the soybean balance sheets. Soybean carryout is now projected to total 250 mb, a 25 mb reduction from March.

This decline is credited to increases in soybean exports and crush.

The USDA believes the United States will see an increase in soybean demand due to the shortfall in South American production.

Trade is starting to make projections on how much corn may be harvested prior to Sept. 1, which is the start of the new crop marketing year.

Given the likelihood of an early and fast corn planting season, an early harvest is likely as well. In September 2007, there were 750 mb of corn harvested prior to this date, and 700 mb in 2010

It is not out of the question that given today’s equipment and a large amount of tillage already done, we could top both of these early-harvested totals.

More opinions are being voiced over what impact this winter’s mild weather conditions will have on corn and soybean production.

Agronomists are warning farmers to closely scout fields for insect infestations as temperatures did not get cold enough in most regions to reduce larva populations.

The real concern may be Asian rust fungus in soybeans. The U.S. cannot afford to lose any soybean bushels, and rust can easily devastate yields.

Analysts are starting to make yield predictions, and for corn, some are quite surprising.

In February the USDA projected a trendline corn yield of 164 bushels per acre. Analysts claim three years of below-trend corn yields is unlikely, and point out a corn yield just 3 percent above trend would be 169 bpa.

Some claim corn yield could possibly top trend by 10 percent such as in previous years with springs similar to this one, which would put it at a huge 180 bpa.

What is just as important as possible corn yield is potential usage. It is well known that ethanol demand on corn has stalled from its long standing increase and has actually started to retreat.

This makes much more corn available for uses such as export and feed. It is also a definite possibility that corn production could rise far enough to absorb a possible increase in Chinese import demand and still see stocks build.

There has been a lot of talk in the market recently over possible corn yield, but not much on soybean yield. It is quite possible that soybean yield could top trend as well this year.

In the last year similar to this one, soybean yield topped trend by 16 percent, which would give us a national average of 48 bpa. This would be well above the previous record soybean yield of 44 bpa set in 2009.

It is a well-known fact that China needs to import corn to satisfy demand, but the question is when this event will begin and how much corn it will buy.

Most of China’s importers claim they will wait until later in the U.S. growing season before extending coverage, as a normal developing crop will likely lead to reduced futures values.

It is also believed China will need to import at least 10 million metric tons, or nearly 400 mb of corn per year to satisfy growing demand.

The largest use in China is swine production, which consumes a large 7 million metric tons of corn per year.

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

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