The February balance sheets were little changed from January, which is not uncommon.
U.S. corn carryout decreased a minimal 35 million bushels to a 2.32 billion bushels total.
The wheat carryout estimate decreased 47 million bu but still stands at a comfortable 1.14 billion bu. Soybean ending stocks were unchanged from the previous month at 420 mb.
Even fewer changes took place to the global balance sheets, with the only one being of interest was a 2 million metric ton-reduction to Argentine soybean production.
Global corn production is being heavily debated. The USDA continues to use an 86.5 million metric ton Brazilian corn crop in global balance sheets.
Analysts in Brazil believe the corn crop will be much larger though, with some at 95 mmt. This is a difference of 335 mb, and could easily make up for smaller crops in other regions of the world.
We are also seeing differences between the USDA and the world market on soybean production, mainly in Argentina. USDA is predicting a 55 mmt soybean crop for Argentina, while field scouts in that country believe it will be closer to 51 mmt. This equates to a difference of 220 mb. Trade does not believe we will see a total soybean loss that large though, which has tempered its impact on the market.
So far, the United States has seen less soybean competition from Brazil in the global market than thought. It was believed that Brazil’s January soybean exports would be a record volume, but sales appear to have fallen short of expectations.
Ongoing rains and delays to internal shipments are the cause of the slower loadings. Exports are starting to increase though, and will likely double the volume of soybeans Brazil shipped in February 2016.
A topic that is starting to receive more notice by the marketplace is how much double-cropping we may see in Brazil this year. Given the early soybean harvest and favorable weather conditions, it is believed double-cropping may be higher than usual.
While this is possible, the fact that corn values have dropped a considerable amount in recent weeks may prevent this from taking place. Financing will also affect double-cropping, as tighter lines of credit will reduce the ability to secure needed inputs.
Corn and soybeans quality is becoming more of a focal point across the market. There are more concerns being voiced over the quality of inventory being stored, and in many cases, this is leading to more movement than commodity values.
This is not just for farm stored inventory, but for commercial stocks as well. As a result, end users are able to satisfy demand without paying an incentive to entice sales.
Country movement of soybeans remains at an elevated level across the interior market. In fact, in many regions it is doubtful producers have very much old crop inventory left to market at all. This is already raising questions over how many soybeans will be available later in the marketing year.
The fact remains that soybean carryout will still be considerably greater than a year ago, which is easing buyer concern over tight country stocks.
Even with elevated movement and high carryout projections, soybean futures are holding at favorable levels. This is because many traders are looking past this year and forward to next year. If the United States would see a return to trend yields and demand would remain unchanged, it is not hard to imagine a much tighter new crop carryout scenario.
As a result, traders are hesitant to pressure futures at this time.
A great unknown in this outlook is acreage. The market is currently in a situation where it either needs to deter 4 million corn acres from being planted or drop to a point where demand grows to prevent a massive build in ending stocks.
This has been a struggle for the market and appears as though it may not become any easier. The soy complex is closely monitoring this situation, as 4 million more acres would reduce the need for above trend yields.
While mostly overlooked, a report from the federal land banks has been released that is disconcerting.
Data from these banks showed U.S. farmland decreased 6 percent in value in the fourth quarter. This was the greatest decrease seen in farmland since the great depression.
The drop in value to being credited to poor commodity values and thoughts are that many U.S. farmers will exit the industry within the new few years.
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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