Global soybean balance sheets are becoming more of a market topic. Soybean demand is expected to grow by 10 million metric tons this coming year.
At the same time, production is only forecast to rise by 4 million metric tons. This creates quite a shortfall in production, even if the U.S. crop is slightly larger than currently predicted.
This is a situation that should provide underlying support for soybeans for at least the next marketing year, and possibly longer.
Volatility in the U.S. soy complex is only expected to increase in the next few weeks. The South American harvest is expected to begin within the next three weeks, which is considerably sooner than trade was expecting.
This could easily put those soybeans into the global market by mid-January. As a result, there are legitimate concerns the window for U.S. soybean sales will close sooner than normal.
We continue to hear reports of high mycotoxin levels in corn that was harvested in the eastern Corn Belt this year. Some of this is high enough that is it finding little interest in being bought. This is a situation that could end up impacting the cash market in the eastern Belt, and if severe enough, eventually in the West as well.
Storage availability across the United States is becoming a point of interest. Many regions claim to be filled to capacity, giving the indication yields may be larger than what the USDA is using in balance sheets.
This may not be the case though, as larger old crop production and ending stocks could cause the same issue. Either way, the fact remains the United States has an abundant supply of corn at the present time.
It is believed the United States will see elevated demand for its ethanol in the global market continue through next year. There are thoughts the U.S. could export 1 billion gallons of ethanol both this year and next. This is good news for the industry, as domestic ethanol demand has been down in recent months from a decline in energy products on a whole. How long demand for U.S. ethanol lasts will greatly depend upon global production though, mainly that in China and Brazil.
Trade is looking forward to the January supply and demand numbers, as that is when we will see the final old-crop production number adjustments. In what will be just as important, we will also see the quarterly stocks released in January. This will show us what first quarter demand looked like, with nearly all attention being given to feed usage numbers.
The USDA is projecting a 350 million bu increase in feed usage on corn from last year, and stocks data will be quick to support or oppose expectations.
We are also seeing estimates on yield changes from November to January, with the most interest being placed on soybeans. Historically, very little change takes place from the November soybean yield to the January balance sheets.
Since 1993 soybean yield has only increased over one-half bushel three times, and only decreased by that amount once.
We may actually see more interest placed on soybean demand in the next supply and demand report. There are legitimate beliefs that soybean demand is currently over-estimated on the domestic side by at least 50 million bushels. If correct, this will off-set much of the increase that is expected to soybean exports.
The corn versus soybean acreage debate is heating up across the United States. From a commodity value point of view one would expect to see heavier soybean planting this coming year. This is not that concerning in the corn market as that grain needs to see a decrease in acres to prevent a burdensome build in reserves.
This could reduce the need for the soy complex to push for acres with elevated futures.
The ultimate deciding factor in new crop acres will likely be weather, both this fall and next spring. Given the open fall weather the United States has seen, a large volume of tillage has taken place. Corn acres tends to increase in such years, especially if nitrogen fertilizer has also been applied. A warm, dry spring may only add to corn acres given historical trends.
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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