Now is the time of the marketing year when farmers start to determine new crop acres, and, as a result, more emphasis is placed on input costs and how they may impact acres.
In the past few weeks we have seen a slight decrease to the cost of fertilizer across the Corn Belt. While this is good news for producers, the cost of corn seed and some chemicals has increased at the same time.
Elevators across the Corn Belt report having a tremendous amount of defer-pay corn and soybeans that producers are beginning to collect.
The revenue from these contracts will give farmers adequate cash flow heading into the spring planting season for needed inputs.
This may force some buyers to again push bids to secure needs. Renewed strength in the futures market may limit any basis strength, especially where movement has taken place.
There are some discrepancies being pointed out surrounding the latest corn-for-ethanol figure projected by USDA.
The current total of corn used for ethanol is estimated at 5.2 billion bushels for this marketing year. Given the latest ethanol usage mandate, this number seems low.
Two reasons being given for the smaller corn use number are:
- The mandate is being doubted as achievable.
- Some demand will be met with ethanol imports.
A report from the government’s crushing division shows more sorghum is being used in ethanol manufacturing.
For the month of November, a reported 10 million bushels was used in the ethanol process. This is 2.7 times the amount used a year ago, and compares to the 3.3 mb of sorghum that was used for ethanol manufacturing in October.
While this is not a huge amount of sorghum, it is displacing expected corn demand.
Even though it is forecast to start weakening, the current El Nino is expected to last through the winter months.
It is not out of the question this will impact the spring planting season, and possibly bring an early start to fieldwork.
In years with early planting seasons the United States tends to see elevated corn acres.
This is another reason the corn market has not tried to compete with soybeans for uncommitted acreage.
Trade is starting to pay more attention to Chinese soybean buying habits. For the past several weeks China has been the primary buyer of U.S. soybeans, but now is the time when this tends to shift to South America.
Even in a hand-to-mouth market, it is likely China has needs covered until South American soybeans become available. One benefit the United States still has over South America is logistics which is favorable in today’s environment.
While the United States has seen stiff competition in the global corn market recently, this is not the case for all corn producing countries.
In fact, Brazil has seen record demand for its corn.
During December Brazil exported 6.3 million metric tons of corn, 84 percent more than the same month a year ago. This was enough to push Brazil’s cumulative corn exports for 2015 to a record 28.9 mmt.
Brazil is also expected to increase pressure on U.S. soybean export programs this year. Brazilian officials estimate soybean exports of 57 million metric tons this year, 4 million tons more than last year.
These are expected to start in March and possibly halt demand for U.S. soybeans.
The primary reason for the decrease on both U.S. corn and soybean demand in the global market is the strength we have seen in the dollar compared to other currency values.
Reports are coming out of Argentina that the country’s wheat crop is poor in quality. Sources in the country claim 80 percent of old crop inventory is not high enough in quality to be used for many purposes.
Another 50 percent of Argentina wheat stocks does not have enough protein to make export grade.
Not only could this increase feed wheat usage in Argentina, but possibly work its way into the U.S. feed market 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.
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