The monthly supply and demand report was released Dec. 9, with practically no change to domestic numbers.
Ending stocks were left unchanged on the three major U.S. crops. This kept corn at 2.4 billion bushels, soybeans at 480 million bushels, and wheat at 1.14 billion bushels.
The lack of significant changes was not a surprise, as only demand is adjusted in this release.
We did see a few more changes to the global carryout figures. World corn-ending stocks now total 222 million metric tons, soybeans are at 82.9 million metric tons, and wheat came in at 252 million metric tons. These were all slightly higher than the numbers released in November, and were mostly from changes to demand.
Corn and soybean yields this year were both record-sized, and well above what trade was expecting. The question is being asked as to how the USDA yield estimates have been so far off from what private field scouts predicted. The obvious answer is that, agree with them or not, the USDA has the most accurate system of collecting yield data in use.
Many private firms use satellite imagery to try and predict yield, which cannot calculate pod counts or ear weights. These are two of the greatest factors behind the higher USDA yield forecasts.
We are now seeing debate increase over South American crop sizes as well. Field scouts in Argentina are predicting a slightly smaller soybean crop than USDA is. In Brazil, field scouts believe the soybean crop will be similar to what USDA is projecting. Near perfect weather is being used in USDA projections though, and it is unlikely these will last all growing season.
A primary story of trade recently has been the less-than-perfect weather conditions in Argentina. Weather in Argentina has turned warm and dry and there are concerns that if these persist, yield loss will take place. While that is a possibility, the fact yield loss has not actually taken place is limiting market reaction.
The likelihood of crops in Brazil being large enough to make up for any loss in Argentina is also reducing market reaction to possible yield loss.
Now that harvest has wrapped up across the United States, the question is how we will move the record stocks being reported in nearly all regions. While this will take some time, it may not be as difficult as in other years.
One great benefit this year is that we are seeing little congestion in the rail market, and a quick turn-around in shuttles is expected. The warmer-than-usual weather this fall has also helped with logistics, especially on waterways.
This fall’s weather conditions have caused uncertainty to build in the commodity market. Many analysts have been expecting to see a shift from corn to soybean production due to more favorable economics. While normally this does in fact take place, the favorable weather for fall tillage has negated much of the economic difference between the two crops.
The fact soybean futures have not rallied in recent weeks is also limiting any interest in shifting out of a normal rotation.
There is a well-defined split starting to take place between the western and eastern Corn Belts. In the west, we are seeing large corn piles as elevators struggle to find room for remaining bushels that need to be harvested.
This is not the case in the east where corn and soybean supplies are not as great. Harvest was strung out longer in the eastern Corn Belt, giving terminals more time to adequately handle incoming deliveries.
There are also more worries in the eastern Corn Belt over grain quality. High toxin levels in corn have been reported in those states all harvest season. There are now concerns that in some cases the corn is testing so high that it cannot be used for many purposes, and high quality may be hard to find.
As a result, some regions of the eastern Corn Belt are already looking at sourcing corn from outside the region for needs.
The drought that has been building in the southeastern United States has not received much attention this year. This is from the fact the area that is covered produces very few row crops.
The concern with the drought is that it is not uncommon to see an expansion from this region into the Midwest. The Plains are already suffering from dry conditions, and if these two systems would happen to join they would cover a large portion of the U.S. Corn Belt.
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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