The corn numbers in the November supply and demand report held little support for the complex.
The average U.S. corn yield increased 1.3 bushels per acre to raise total crop size by 99 million bushels to a large 13.65 billion bushels.
At the same time the USDA cut corn demand by 100 mb which was enough to elevate ending stocks to 1.76 bb, a larger figure than the previous marketing year’s carryout.
The soybean figures were just as negative as the corn data in the monthly release.
The U.S. soybean yield increased 1.1 bushels per acre to elevate crop size to a record 3.98 bb. Even with demand increased by 53 mb, this was enough to give the U.S. 40 mb more ending stocks at 465 mb.
The USDA also increased global corn carryout to 211.9 million metric tons, a large 24.1 million tons more than projected in October.
Much of this increase was credited to a huge adjustment to Chinese corn demand over the past three years of 28 million tons. This was all deducted from feed.
The global soybean stocks data was actually friendly at 82.9 million metric tons, 2.2 million tons lower than a month ago.
Only wheat carryout was adjusted this month and this was also increased by 50 mb.
This put domestic wheat stocks at a large 911 mb. Global wheat data was more neutral at 227 million metric tons, 1.5 million tons less than the October prediction.
Despite large, if not record-sized yields, country movement of corn and soybeans remains lighter than expected in the western Corn Belt.
One reason for this is farmers are hoping for a post-harvest market rally, and recent insurance payments have allowed them this opportunity.
Another is that a large amount of corn and soybeans moved during harvest and additional sales are not needed.
Movement in the eastern Corn Belt is also limited, but this is from lower production totals and adequate storage.
In a year such as this, it’s critical that U.S. farmers look at revenue per acre rather than price per bushel. Even at today’s depressed futures some producers are making just as much revenue per acre as they were a year ago.
This is from the high yields in regions of the Corn Belt. In some cases, producers are actually receiving more income this year than last.
Planting is still taking place in South America, but we are already seeing interest in the upcoming harvest season.
Recent upgrades have been made to Brazilian export facilities that should greatly improve efficiencies.
The main port to receive upgrades was Paranagua, where loading capacity has increased 33 percent.
Not only could this bring buyers to Brazil for soybeans sooner than usual, but more efficient loading could lower export costs as well.
There is a difference in opinion forming in the U.S. cattle industry which is also affecting feed grain outlooks.
In the latest cattle on feed report, there were 102 percent of the animals in feed lots as a year ago. Not only is this a higher number, but cattle are being held to higher weights generating elevated feed grain demand.
We also need to realize that heifers being held back for breeding are still consuming feed grain.
There are theories in the market that demand for U.S. corn is simply slow to build.
There are also those who believe global corn production will fall short of demand causing a draw-down in reserves.
While these are both possible, it is also a possibility that production is currently being underestimated, mainly in Brazil. Recent improvements to both weather and economics are both favoring an increase to double cropping with corn in the country.
Chinese officials have announced a change in ag policy that could end up greatly benefitting the United States.
Rather than make subsidy payments on produced bushels, China is going to pay farmers to idle land for five years.
Hopes are this will not only support domestic commodity values, but also prevent burdensome stocks from building.
This could easily increase China’s import business, including purchases from the United States.
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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