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By Staff | May 18, 2018

The domestic corn balance sheets showed no changed to old crop ending stocks with a 2.18 million bu carryout. The initial new crop production figure came out with a 174 bushel per acre yield and a crop of 14.04 billion bu. New crop carryout was projected at 1.68 billion bu, very close to the average trade estimate. Global corn reserves are forecast to tighten to 159.1 million metric tons next year though, a 35.7 million metric ton reduction from this year.

Old crop soybean reserves in the United States were reduced by 20 million bu due to a projected increase in crush. This still leaves them at a comfortable 530 million bu. Soybean production was estimated at 4.28 billion bu from a 48.5 bushel per acre yield, which is expected to tighten ending stocks to 415 million bu at the end of the new crop year. This was 120 million bu under the average trade guess. Global soybean reserves are forecast to shrink 5.46 million metric tons though, and stand at 86.7 million metric tons next year.

Wheat ending stocks were little changed on old crop at 1.07 billion bu. The initial new crop carryout estimate was for 955 million bu. The initial world wheat carryout projection on new crop was for 264.3 million metric tons, a 6 million metric ton from this year.

The official production numbers on Brazilian corn and soybeans were also updated this week. The firm CONAB now predicts a Brazilian soybean crop of 117 million metric tons compared to last month’s 114.96 million metric tons. The big surprise was on corn, where CONAB pegged production at 89.2 million metric tons, up 590,000 metric tons from April. Average yields in Brazil are estimated at 49.5 bushels per acre on soybeans and 85.4 bushels per acre on corn.

We are seeing a mixed opinion on this year’s planting pace and the potential impact on final yields. This is mainly for the U.S. corn crop. Many analysts claim that any corn planted after May 10th tends to yield lower than corn planted prior to the date. Others are quick to disagree and claim that with today’s genetics we see little yield loss if planted before the end of the month. One thing all experts claim is that the crop should not be planted until soil conditions are ready to prevent yield loss.

The main concern is what impact slow plantings may have on the crop as it develops. The greatest worry is that the crop will now be pollinating during a hotter period of the growing season and yield will be impacted. While this is quite possible, it is too early in the season to receive much of a reaction in the market because of it.

Logistics are being more of a factor in world price discovery than product inventory. This is especially the case in the soy complex. Argentine soybean production is going to be down this year, but other South American countries are forecast to have larger crops, with most being record sized. The high volume of carryout in the United States can also be used to cover these needs. This is why the news of the smaller Argentine crop has not received as much attention as some analysts had hoped for.

Trade is starting to take a second look at recent soybean bookings by Argentina. To see Argentina buy soybeans for import is not uncommon, as the country normally imports nearly 90 million bu every year. So far this year the country has bought 13 million bu of U.S. soybeans, which is not a normal source. Trade is now wondering if these sales will actually be delivered or traded out of as the year progresses.

Not only is soybean yield down in Argentina this year, but now we are hearing of quality issues as well. This is from the excessive rainfall in recent weeks which has caused flooding. We are now hearing reports of soybean pods splitting, and even of soybeans sprouting while in the fields. This could greatly impact what soybeans can be used for once they are harvested.

Country movement across the Corn Belt has all but came to a complete halt. This is not uncommon once all attention turns to spring planting. Normally we see commercial movement ramp up at this time to make up for the decline in farmer movement. Commercial movement may be limited this year as well though given the rate at which farmers are going to want to get planting completed in.

Trade continues to focus on Chinese soybean trade, or more importantly, the lack thereof. China has not listed as a buyer in recent export sales listings, and an unknown buyers have been shown to cancel previous purchases. At the same time a reported six vessels of U.S. soybeans are being held up in Chinese ports due to questionable import certificates and not being off-loaded. This has caused some trains of soybeans destined for the Pacific Northwest ports to be re-sold into the interior U.S. market.

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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