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KARL SETZER

By Staff | Nov 27, 2015

Trade is becoming more concerned over the slow export sales pace we have seen on corn.

To date the United States has only sold 27 percent of the yearly projected total on corn compared to the 40 percent that is normally sold by this date.

This is mainly from buyers such as Japan – which has only booked 60 percent of the corn it normally does from the United States.

In fact the only country who has booked more corn than a year ago at this time is Mexico at 104 percent.

More than ever, the United States needs to be competitive in the global market on corn and soybeans.

This is from the fact importers now have more choices for coverage than when the United States was the main supplier to the world market.

The U.S. has not been competitive on corn, and this has been reflected with exports that are well below expectations.

Soybeans have enjoyed better demand, but this may be short-lived as South America will again be making exports in March, if not before.

There is a difference in opinion forming over U.S. soybean demand.

Soybean sales have lagged a year ago for much of this marketing year, which has weighed on the complex.

At the same time, we have seen export loadings top the pace seen a year ago. This is a perfect example of how the world market is more of a “hand to mouth” type market and not as interested in stock piling reserves as in the past.

Trade is also closely monitoring world demand for distiller’s grains. The most concern is on China, as China has announced it will increase ethanol manufacturing to work through the countrys huge corn supply.

If correct, this could easily reduce China’s demand for U.S. DDGs which account for 50 percent of yearly exports.

While much of the talk surrounding South American weather has been on dry conditions in Brazil, the country is also suffering from excess moisture as well.

This is more the case in Southern Brazil, and more of a factor for wheat.

There are reports of wheat in Southern Brazil being damaged enough it will only make it to feed grade. If true, this could easily cause more Brazilian corn to exported this year.

Much of the interest in South America recently has been on soybean production, mainly in Brazil. We are now starting to see projections released on Brazil’s corn production as well.

Firms in Brazil now have the country’s corn crop pegged at 82 million metric tons, which is higher than the 81.5 million tons USDA projected.

Thoughts we will see increased double cropping and more favorable economics for corn are behind these higher estimates.

USDA has increased its estimate for Argentine corn production for this year. This is a result of the expected changes in Argentine taxes following the upcoming election.

In the latest global production report, USDA pegged Argentina’s corn production at 25.6 million metric tons.

Even if this does not in fact take place, the possibility it could further increase a large global corn supply has been negative for the market.

Concerns are building over the state of the U.S. farming economy. Farmers have started to tighten their belts following the decline in commodity values, and purchases of products such as equipment have slowed considerably as a result.

We are also hearing of decline in input purchases, which is not uncommon. Land values remain high, but several economists believe these will soon recede as well.

An unstable economy is not just concerning for U.S. farmers, but around the world. It is believed that economics will play a major role in South American crop size this year due to reduced plantings and lower input use.

The same is being heard in Ukraine and China, as well. The greatest concern of these is what happens in China, as not only could it impact production, but imports and demand as well.

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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