U.S. sees market pressure
The United States continues to see heavy competition in the global market for corn business.
China has recently been a heavy buyer of Ukraine corn, even though the corn is higher priced than what is being offered into the global market from the United States.
China is willing to pay this premium to avoid potential GMO issues when the corn is brought in for unloading. It is not out of the question that Chinese importers are buying larger volumes of Ukraine corn now in case it is not available later in the year.
Not only is U.S. corn suffering from less than stellar demand, but so are soybeans. This is not uncommon on soybeans at this time of the year as newly harvested South American soybeans are now making their way into the global supply line.
China has also limited its buying interest in recent weeks, and is, instead, taking a wait-and-see approach to making bookings.
As with corn, domestic soybean demand has also become pressured as crush margins have eroded in some regions of the interior market.
Not all is negative in the U.S. export market, however.
Concerns over China washing out of U.S. soybean bookings are minimal this marketing year, mainly from the country staying current with loadings versus sales.
The delay to Brazil’s planting and harvest season were also beneficial to preventing cancellations from taking place.
The same is not necessarily true on soy meal, however. China currently has twice the volume of unshipped soy meal bookings from the United States than a year ago, and these could easily be canceled given today’s global price spreads.
Chinese officials have also indicated that the stock piling they have been doing with grains will likely continue.
In an effort to do this Chinese officials will increase the country’s buying budget by a reported 33 percent in the coming year. One country who hopes to capitalize on this is Ukraine.
Ukraine authorities are hoping they can double their corn exports to China in the near future.
More attention is being placed to spring weather outlooks.
We are starting to see forecasts released that are calling for cool, damp conditions during the month of April, mainly in the Plains States.
This is not uncommon during an El Nino influenced season. While there are some concerns these conditions could cause planting delays in the Corn Belt, there is also the belief that they will benefit dry soils.
While weather conditions can and will impact this year’s acres, there are other factors as well.
One that is getting more attention is the recent increase in demand we have seen for sorghum in the global market, mainly in to China. Chinese buyers have been importing sorghum as an alternative to both higher-priced and non-approved corn from the United States.
Shifting acres to sorghum production may be a risky move though, as any change in China’s import policy could leave the farmer with a large amount of cheap grain with limited demand.
We are approaching the long-awaited quarterly stocks and projected plantings reports. Of these two, trade is focusing most of its attention on the prospective acres.
While this is an important number, actual planted acres can and will change from now until the spring season is actually here.
Quarterly stocks are more of a solid number, and used to verify demand.
Quarterly stocks can also impact both old and new crop values, while acreage estimates are more of a new crop price factor. Not only do quarterly stocks indicate current demand, but hold much old crop carryout we will have.
This is especially true now that we are half way through the marketing year. The stocks number can also be used to determine how great new crop production needs to be to satisfy demand.
These numbers will also be incorporated into the April balance sheets, with most interest being placed on corn.
It is interesting to see that of the 10 most recent years, corn carryout was unchanged in two years, higher in four, and lower in four when compared to the March data.
What is more noticeable than the number of changes is the amount we saw carryout change. To see a sizable difference in ending stocks on corn from March to April is not uncommon.
Karl Setzer is a commodity trading advisor/market analyst based in the West Bend office of MaxYield Cooperative. He can be reached at (800) 383-0003.
The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.
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