Very few changes took place to the corn numbers in the April supply and demand report.
The USDA reduced feed demand by 50 million bushels, but increased industrial and ethanol usage by an equal amount. Total corn usages decreased 25 mb to give us a corn carryout of 1.862 billion bushels.
The global corn stocks number also increased to 208.9 million metric tons.
Even fewer alterations were made to the domestic soybean balance sheets. Soybean exports were upped by 15 mb, reducing projected carryout to 445 mb.
While smaller than the previous estimate, this is still a historically large number. As with corn, the global soybean reserve number increased to 79.5 million metric tons.
Domestic wheat carryover increased 10 mb to an even more burdensome 976 mb total. This was caused by a 10 mb decrease to feed usage.
As with the other commodities the global wheat stocks increased a slight amount and now stands at 239.3 million metric tons.
One point of interest from the monthly report that is being questioned is feed grain demand. Feed usage on all major grains was reduced, even though livestock numbers are on the rise.
One theory for this is the favorable pasture conditions and increased grazing. Another is that more hay has been fed in recent months, offsetting the need for grain.
There is another possibility for the reduced feeding of U.S. grains. This is the elevated imports we have seen this year compared to those in recent history.
Much of this has been feed grains and products into the Southeast feed market, and has negated the use of domestic products.
This is concerning to farmers in that region who see it as a reason for depressed domestic grain markets.
How many acres may exit the Conservation Reserve Program this year and what will happen to them is becoming more of a market topic.
In the past two years many acres that have left the program have remained idle as they are not prime farm ground to begin with.
The decline in futures we have had over the past two years has also been a determining factor in leaving this ground idle. There are some analysts who believe this factor will alter the prospective plantings report that was released last week.
A bigger question on these acres is if their lack of use will be noticed. For one, the land is not being farmed at the present time, and right now the production is not needed.
The fact this land was not prime farm ground to begin with will also lessen the blow of its absence. It would actually not be surprising to see farmers focus more attention on their prime ground this year on a whole, as that is where they will see their greatest return on investment.
Even if we would see a slight reduction to corn acres and yield this year, it may not significantly impact world balance sheets.
This is from the uncertainty that China is bringing to the market. There are thoughts that China may fully remove themselves from the world grain market as they are approaching a self-sufficient level.
Even if we would see a slight reduction to world corn production, it would still leave global corn to stocks at a near record level.
We are now at a critical time for the spring planting season. This is the point where many regions of the Corn Belt are past the federal crop insurance date to start planting.
Planting activity will now start to increase across the Corn Belt, giving us a clearer indication of actual planted acres.
This is also a point in the year where more attention in the market turns to weather conditions and their potential impact on crop development.
One of the most talked about factors in the market remains how winter weather conditions could impact this year’s growing season. Several weather experts claim the warm winter will lead to a warm summer in the United States as well.
While this is possible, history does not indicate a warm summer is a given. Research shows that in 20 years with winters such as the last one, only 12 of the following summers were warmer than average as well.
A heavily debated topic in the market right now is what impact weather has had on the Brazilian Safrinha crop. The Safrinha crop is the name given to Brazil’s winter corn crop, and it is widely believed this has been reduced from drought conditions.
Some field scouts in the country claim the crop has been reduced by a large 10 million metric tons. This could be a leading factor in why Brazil is considering the elimination of their 10 percent corn import tariff.
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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