While up considerably from a year ago, corn and soybean stocks as of June 1 were under trade estimates. Corn stocks totaled 4.47 billion bushels compared to 3.85 bb a year ago. Soybean inventory on that date totaled 625 million bushels, well above last years 405 mb.
Wheat reserves on June 1 were above both trade estimates and last years 590 mb at 753 mb.
Acreage revisions came in close to trade expectations in the U.S.D.A. update. The U.S.D.A. now pegs planted acres at 88.9 million for corn, 85.14 million on soybeans, and 56.01 million of wheat. Last year U.S. farmers planted 90.6 million corn, 83.7 million soybean, and 56.8 million wheat acres. The soybean acreage is being heavily debated though, as that crop is still being planted and acreage loss is possible.
Now that these reports have been released, trade will return to monitoring crop reports and weather forecasts for daily market direction. Recent forecast models indicate cool, wet conditions across much of the Corn Belt as we approach the pollination stage of development. Normally, these conditions would be considered bearish for market values. This year may be different though, as most field scouts claim crops could actually use more heat units now than anything.
We are starting to see more of a variance in corn crop conditions between the East and West Corn Belts. States in the west now have some of the better ratings, while those in the east are starting to show stress. The areas of the west that look the best produce 40 percent of the U.S. corn crop, while those that look the worst in the east produce 28 percent of the crop. The question now is what shape the remaining 32 percent of the crop is in, and if it will be good enough to make up for losses in other areas.
Even with thoughts of losing acres and potential yield loss, corn values have only shown moderate strength. This is from the pressure we have seen from the global side, where corn production is much less of a concern
In the latest supply and demand report, the USDA only decreased global corn reserves 2 million metric tons from this year to next. The primary reason for this is a 12 million ton increase to Chinese production though, which is being doubted by several market analysts.
While global corn production is going to be large this year, many analysts are over looking the fact that demand will be high as well. At the present time corn demand on the year is forecast to increase 14 million metric tons from a year ago. This is positive, but is lower than the 24 million ton yearly increase from last year to now. The greatest increase to demand is going to be to global feeding, as 3 million metric tons less wheat is forecast to be used for feed next year.
Trade also seems to be overlooking soybean demand. In the past month the world has seen record soybean demand of 25 million metric tons. This is a 15 percent increase from one year ago. Over the past three months soybean consumption has increased a large 3.5 percent, indicating a yearly demand increase of nearly 9 million metric tons. Given this growth in demand it is critical the world keeps expanding its soybean output.
The United States continues to struggle in the world market for export business. This is a result of foreign currency values being sharply discounted to the U.S. dollar, which encourages sales from other sources. The concern with this is that spreads have widened to a point where U.S. imports of some commodities make economic sense, primarily soy meal. Even if this does not happen, the possibility and threat are negative for the soy complex.
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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