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KARL SETZER

By Staff | Nov 6, 2015

Trade is already starting to look forward to the November supply and demand report. Ever since data was collected for the October balance sheets we have heard of better-than-expected yields.

Given the unlikely chance of another acreage reduction, this could easily give us larger crop sizes.

We have also seen harvest advance far enough to receive more actual yield data, not just estimated figures.

More than production, we could see changes to usage in the November supply and demand figures. This is especially on corn, where no alterations were made in the October release.

The obvious change expected for corn is to exports, as these have trailed expectations all marketing year.

To see feed demand decrease would not be surprising either, but at the same time, this may simply be off-set by higher ethanol production.

Competition in the world market for soybean business may not be fully realized by some trade participants.

In the latest supply and demand numbers, U.S. soybean loadings were expected to decrease by 5 million metric tons from a year ago.

At the same time total South American soybean loadings are forecast to increase nearly 6 million metric tons.

The primary shift in demand is due to China, who has booked 300 million bushels fewer soybeans from the United States this year than last.

The United States has started to see more demand for its soybeans in the global market in recent weeks however.

This is largely in part from currency exchange rates which now favor the United States over other suppliers.

The lack of competition from South America in the global market through February has also been beneficial to sales.

The question now is how long this demand will last as in a few months South America will again be harvesting its crops.

While global soybean production is set to increase this marketing year, world corn production will likely decrease.

World corn output was down 7 percent in the October supply and demand report, mainly from smaller crops in Russia and Ukraine.

We are also expected to see less corn grown in South America this year.

World wheat production is very high though, and to see wheat displace some corn uses would not be a surprise.

Traders continue to monitor the existing El Nino weather pattern, but are paying more attention to South America than to the United States.

Soils are drier than normal in northern Brazil at the current time, which is not uncommon in an El Nino influenced year.

While it is still early in the planting season for Brazil, this is a situation that will be monitored closely.

Scientists are closely monitoring this fall’s bird migration across the United States. This is from the outbreak of bird flu last spring that caused the culling of a reported 48 million birds.

Feeders are still trying to rebuild these flocks, and measures have been put in place to limit potential exposure to the disease.

Industry experts still believe outbreaks will take place, they just do not know to what extent.

Reports are coming in that some producers across the Corn Belt are putting corn in bags as a temporary form of storage.

This is being promoted by some economists who claim the cost of filling bags is cheaper than commercial storage.

Some claim corn can be stored in a bag for as little as 20 cents per bushel. While using bags to store corn is not a new practice, it can be costly if the grain is not monitored closely and damage occurs which is not uncommon.

Tension is building over distiller grain trade between the United States and China. China is again accusing the U.S. of dumping DDGs on the market and many buyers have backed away from U.S. offerings as a result.

Given the fact China accounts for 50 percent of U.S. DDG export business, this could easily cause a back-up of DDGs in the domestic market.

This is not the first time the U.S. has had to deal with this issue though, and it has not had a major impact on meal demand which is where the concern comes from.

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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