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By Staff | Apr 26, 2013

More concerns are being voiced over the possibility of delayed corn plantings this year.

Trade is starting to compare this year to the ones of 2008 and 2011. In those crop years, 10 to 13 percent of the nation’s corn crop was planted by late April, a pace which could be easily seen this year as well.

Corn futures in both of those years traded sideways from this point of the year forward until yield potential could be better determined.

Soybean futures have fallen under considerable pressure lately, even with tight carryout forecasts. This is from dropping demand in China, the world’s leading soybean importer.

China has had disease cut its hog herd in recent weeks, and now there are concerns the same could happen to the country’s poultry industry. If correct, this could greatly impact not just the United States, but the entire world soybean market.

Brazilian officials have increased that country’s corn crop production estimate. The country’s second corn crop looks very healthy heading into the critical grain filling stage according to field scouts.

It is now believed this year’s corn crop could top last year’s record-sized production. The USDA currently has Brazil’s corn production pegged at 72 million metric tons, but Brazilian officials have it closer to 76 or 77 million tons.

While Brazil’s corn crop does in fact look good at this point, there is plenty of time for yield loss. The most critical time frame for corn yield determination is still in front of the crop.

If adverse weather hits the country in the next few weeks, yields will likely be jeopardized. A late-planting season to the second crop of corn is also increasing the chances of some yield loss.

The reality of large corn production in Brazil, as well as all of South America, could be negative for for those countries. Brazil typically uses 52 million tons of corn domestically.

The remaining bushels will be exported, but given today’s futures market, these offerings may not be competitive. This could cause a build in Brazil’s corn inventory and disrupt future grain storage needs.

The U.S. ethanol industry is giving trade mixed signals. Ethanol manufacturing margins have greatly improved in recent weeks following the drop we have seen in corn values.

At the same time, ethanol blending margins have eroded due to a declining energy complex and lower gasoline demand on a whole. This means we could see an increase in corn demand by the industry, but only for a limited time.

Another market factor that is being influenced by the U.S. ethanol industry is distiller’s dried grain production and demand. An increase in ethanol manufacturing will in turn mean more DDG to compete with corn.

DDG values have also collapsed in recent weeks following the setback we have seen in corn futures. Distiller grains are now back to levels not seen since June 2012, prior to the drought that impacted last year’s corn production and market values.

Weather continues to give today’s trade mixed signals. We continue to see precipitation systems move through the United States, replenishing soil moisture reserves as they do.

At the same time, planting is not taking as place as fast as what we’ve seen in recent years.

Agronomists are quick to point out that plantings are not necessarily delayed though, which is preventing a reaction in the futures market.

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

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