More attention is being paid to the historical changes in yields for the remainder of the marketing year, mainly on corn.
Corn yield has a strong tendency to increase in the final January report when it increases from the October to November production reports such as it did this year.
That said, for the past two years final corn yield has declined 2.3 and 2.4 bushels per acre in January.
Even if we would see yield decline this much, it would still leave carryout at 1.5 billion bu in todays market.
Soybean yield also has a strong tendency to increase in such years, but only by fractions of a bushel.
The USDA is currently projecting a corn carryout of 1.76 billion bushels.
By comparison USDA pegged corn ending stocks of 2 bb a year ago at this time. Corn values are relatively equal to a year ago though, as last year carryout was shrinking, but this year it has been increasing.
Production is only one factor in corn balance sheets though, and from this point forward alterations in demand will be more significant.
What happens with the larger-than-expected Chinese corn reserve could have a tremendous impact on this.
China is sitting on 28 million metric tons more corn than the trade thought and there are indications this could be offered to the export market.
Even a small portion of this corn would alter demand projections for the United States which are already struggling.
Questions are still being asked on the corn demand figures that were released in the November balance sheets.
Mostly these numbers were just fine-tuned with no major changes. Several analysts believe we could see further reductions to corn exports in future supply and demand reports as demand has not increased since data was collected for the November report.
Feed demand is also being questioned even though this number increased in the last report, cheap alternative grains may off-set corn in feed rations.
One domestic use that is being questioned is ethanol production. Ethanol buyers are showing no interest in covering needs in today’s environment.
This is coming from multiple reasons, including poor margins, adequate corn reserves, and the option of using alternative raw stocks if wanted.
The lack of global demand for U.S. grains has increased the availability of these for domestic buyers, including sorghum and wheat.
Attention is also being placed on soybean carryout. There are now analysts who do not believe soybean carryout will fall below 400 million bushels for the remainder of the marketing year.
The last time the U.S. soybean carryout was this high futures averaged $5.66 for the marketing year. Given the global demand base for soybeans this year, it is highly unlikely soybean futures would even approach that level.
We are starting to see elevated movement of corn and soybeans across the interior market. Much of this is coming from commercials who want to move inventory out of temporary storage.
There are buyers who claim this will give them enough coverage to last through the end of the calendar year. Buyers are then hoping we will see the seasonal trend of country movement take over to keep inventory adequate.
Some economists do not believe this elevated movement will last. One reason is that many U.S. producers have received insurance payments that are providing adequate cash flow.
Another is that there is nearly twice as much grain and soybeans under loan in the United States this year than last, generating additional cash flow for producers.
There is a shift taking place in the world commodity market that analysts need to become accustomed to.
This is the shift to a hand-to-mouth buying pattern. Buyers know they have access to a steady supply of commodities to pick from, especially soybeans.
This means more soybeans are being booked for immediate ship delivery, which is verified by the cumulative sales totals compared to the cumulative loadings totals.
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