Corn yield lowered, soybean yield raised
The September supply and demand numbers from the U.S. Department of Agriculture received a more favorable reaction in the corn pit than from soybeans. The average corn yield was reduced by 1.3 bushels per acre to leave it at a large 167.5 bpa. This is enough to give the United States a 13.58 billion bushel crop and new crop ending stocks of 1.59 bb. While these were in fact smaller than previously forecast, they are still adequate in today’s market.
The U.S.D.A. surprisingly raised the U.S. soybean yield to 47.1 bpa in the September balance sheets when most analysts had been expecting a decrease. This yield is expected to give the United States a 3.93 bb soybean crop and new crop ending stocks of 450 million bushels. This is only 20 mb less than predicted in August and not enough to change the market dynamics a significant amount.
The updated wheat numbers were the most negative, as new crop carryout increased 25 mb normally this would not be a number worth mentioning, but given already large wheat reserves any increase is negative.
Wheat ending stocks are now projected at a large 875 mb with wide stocks to use of 40.9 percent.
We continue to see harvest advance across the Southern United States. There are reports coming in that indicate we could be seeing harvest activity in the heart of the Corn Belt by next week at this time.
Trade is very interested in seeing this happen as we will finally see how bad the crops may be in the East and how good they may be in the West. Trade is also going to closely monitor how much of this newly harvested inventory is stored and how much is moved right to the supply line and how it impacts basis values.
A factor that is making it hard to determine actual crop size is the wide variability we are seeing in fields. This is not just in stands but in crop quality as well. Field scouts are reporting ears of corn that have aborted kernels in regions where the crop was stressed.
In soybeans there are reports of sudden death impacting fields. The question with these conditions and how much they will impact total cop size is how wide spread they are across the Corn Belt.
One of the greatest limiting factors in today’s market is new crop demand. At the present time new crop corn export sales are at the second lowest level in the previous five years. New crop soybean sales are even lower at the absolute least amount in the past five years.
While it is possible that domestic usage could make up for a portion of this lackluster global demand it is doubtful it will be fully off-set.
The lack of global demand for U.S. corn and soybeans is coming from two different factors. One is simple supply and how importers have their choice of where they can originate grain and oilseed needs.
Another, and one that is more of a factor, is currency exchange rates. Not only does the current exchange rate make U.S. origin imports more expensive, but these rate differences are encouraging foreign sales as well.
Much of the interest China receives when it comes to global trade is on soybeans, but corn is becoming just as much of a factor. China’s government has recently announced they will not be issuing any new corn import licenses.
By taking China out of the corn import market it generates more competition for what corn demand there is. This allows buyers to take more time in making purchases, and tends to weigh on global values.
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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