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KARL SETZER

By Staff | Oct 26, 2016

So far, soybean yields across the United States have topped many expectations. The question now is how high the soybean yield could climb. In 1994 soybean yield was 115 percent of trend, which would put yield at 53.7 bushels per acre this year.

This would add 257 million bushels of soybean production to the total crop. While this may seem like a stretch, daily yield reports indicate it is possible.

These higher-than-trend yields could end up having an impact on next year’s planting intentions. Many analysts are expecting a shift in acres from corn and wheat to soybeans, but it may be greater than thought.

This is from the higher return per acre on soybeans even in a depressed market. In many cases, this may mean the difference between profitability and below breakeven returns.

Even though it was reduced in the latest supply and demand report, there are several questions surrounding the national corn yield estimate of 173.4 bushels per acre. This is from the fact individual state yields are being questioned, especially in states such as Iowa.

The Iowa corn yield is projected at 198 bushels per acre which seems like a stretch according to reports from across the state. Many claim the crop will be no better than last year, which would indicate a 190 bushel per acre average.

Cash sales have been heavier than expected as we move through the harvest season. In many cases producers are opting to deliver the inventory they cannot store at home and sell it rather than pay commercial storage.

The high cost of commercial storage compared to re-ownership is a major factor in why this is happening. Trade is now starting to question how much movement we may see post-harvest if selling now is generating adequate cash flow.

The pace at which the United States has been exporting corn this marketing year is becoming impressive. So far U.S. corn loadings are running 1.5 million metric tons ahead of a year ago and have been building.

This comes at a time of year when we normally see demand for U.S. corn recede until harvest is complete. The shortage we have seen to South American corn production is a primary reason for the added demand.

Even with this demand, we may see pressure continue in the corn complex. This is from simple production and inventory. It is believed the United States could see new crop corn carryout approach 3 billion bushels this marketing year and again next year. Even with the higher demand it may be hard to rally corn futures with these ending stocks of this size.

There is concern being voiced over the high volume of mycotoxins being found in this year’s crops. This is in crops that have been subjected to high levels of precipitation, especially those that have been in fields that were flooded. These toxins will make storing this year’s crops difficult, and has also added to the volume of sales taking place right out of the field.

Even though we are still in the midst of the U.S. harvest season, we are starting to see more emphasis placed on commodity usage.

For corn trade is very interested in feed demand, and how it may be difficult to reach the USDA projection. If we are to reach the 5.65 bb of demand that is forecast, we will need to see record consumption each quarter.

This is already putting emphasis on the December stocks report, as 1Q feed demand tends to be the highest of the marketing year.

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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