The October balance sheets gave us few surprises in the corn market.
Yield was increased .5 bushel per acre to a national average of 168 bpa. This is forecast to give us a crop of 13.55 billion bushels and a carryout of 1.56 bb given current demand estimates. The U.S.D.A. did reduce harvested acres on corn by 400,000, but this was hardly noticed given the unchanged demand numbers.
Soy complex numbers were a little more interesting for trade. Soybean yield increased a minimal amount to a fully expected 47.2 bpa national average. Crop size is now estimated at 3.88 bb and ending stocks at 425 million bushels The U.S.D.A. reduced the harvested acres of soybeans a large 1.1 million acres, but much of this was absorbed by a 50 mb decrease to forecasted exports.
Minimal changes were also made in the wheat balance sheets. Wheat production was lowered in the United States, but so was demand, which left the United States with a still large 861 mb.
Even though harvest is just getting underway in the United States, country movement of new crop inventory is being closely monitored. Before long farmers across the United States will be faced with the decision to either sell or store any excess inventory they have. Many are holding a larger amount of old crop than normal as well, making country storage tight in many areas, especially those with higher yields. Not only will movement be monitored on a whole, but whether farmers move soybeans or corn.
Some analysts are using country movement and basis values as an indicator of yields, but this is highly questionable. Producers have indicated they will hold as much inventory as possible this year rather than move it at today’s bids. This is especially the case in the Eastern Corn Belt, where not only are yields down from a year ago, but the country pipeline was mostly empty to start with. This has allowed basis values to firm much sooner than anticipated this harvest season.
It is still early in the harvest season, but we are already hearing reports on this years soybean quality. So far most reports indicate protein content in this years soybeans are lower than a year ago. Sources also claim this years soybeans are larger than those of a year ago. This is quite possibly the reason behind the high yield reports, as it takes fewer soybeans to make a bushel.
We are seeing signs that indicate this year’s crops could be just as difficult, if not worse to store as those in recent history.
There is a high variability in corn and soybean moisture levels this year, sometimes in the same load. There are also reports of higher foreign material in soybeans, mainly pods. As a result this years crops will need extra attention while in storage.
More attention is being placed on fall weather outlooks, and not just how they will impact harvest. In many years fall weather can directly impact the following years acreage. In years with favorable fall weather farmers tend to get more fieldwork done, and this in turn can lead to increased corn acres. While this is in fact a trend, elevated input costs may hinder a large acreage shift in today’s market environment.
Cash rent levels across the United States have started to decrease in sympathy with lower commodity values, but not nearly enough according to economists.
This is not uncommon as land values are usually the last to decrease in times of depressed agricultural markets. Inputs have failed to recede much either, which is keeping returns for many farmers across the United States in negative territory.
As a result, some producers may choose to raise the crop with the least expense this coming year, not the greatest return.
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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