Weather is becoming more of a factor in price discovery. Rains have moved through the Western Corn Belt and alleviated dry soils in many areas. Others are still deficient on moisture though, as are parts of the Eastern Corn Belt. As always, this will generate debate on whether the good regions are favorable enough to off-set any potential losses in stressed regions if current patterns continue.
We are seeing a shift in market attention from old crop to new crop, which is not uncommon at this time of the marketing year. Right now we are seeing a new crop corn carryout estimate of 1.68 billion bu. As expected, this number is being heavily debated. In order to reach this carryout projection we will need to see elevated demand from this year, mainly on feed. It is also possible to see elevated export demand due to a short corn crop in South America.
Trade is also questioning new crop soybean carryover estimates. Current data shows a 115 million bu reduction in soybean carryout from old crop to new crop. The wild card in this is if export loadings on soybeans catch up to sales. If not, we could add 220 million bu of soybean stocks to current balance sheets.
Another factor that will greatly impact new crop ending stocks is obviously production. Trade is trying to determine how this year’s slower planting in parts of the Corn Belt will affect total acreage. History shows us that if the U.S. corn crop is not 80% seeded by the third week of May we tend to see intended corn acres shift to other crops. This was mostly in a pre-ethanol market though, which has greatly reduced any shifting from corn to another crop. Data shows that since 2013 the largest decrease to corn acres has been 300,000 acres.
What can have just as much of an impact on acreage is how fast soybeans can be planted. Data from the group F.C. Stone shows that in five of the past six years soybean acres have increased from the March intentions to the June revisions. The greatest increase in recent history was in 2012 when soybean acres jumped 2 million over this time frame. We are also seeing better return projections on soybeans than on corn, which could impact acres as well.
Domestic processing numbers on corn and soybeans were quite favorable for the month of April. For the month the United States crushed 171.6 million bu of soybeans, which was a record volume. Ethanol manufacturing consumed 445.3 million bu of corn during April. These volumes were both down from March, but well above what was seen a year ago.
Export data for the month of April has been released and showed mixed demand. The United States exported 303.6 million bu of corn in April, a 48 million bu increase from March. This volume was also a 40 percent increase from April of 2017. Soybean loadings in the month reached 79.6 million bu, a sizable 39.4 million bu decline from March. This soybean total was also down 11.8 percent on the year.
Renewable fuel export data for April was also released. Ethanol exports during the month were up a large 86 percent from April of 2017. Brazil was the leading destination and took 38 percent of total shipments. While this seems bullish, ethanol imports were greater than exports. This created a trade deficit of $46.2 billion for the U.S. ethanol industry.
We are seeing more interest placed on the Brazilian corn crop. The USDA is currently estimating a Brazilian corn crop of 92 million metric tons, but officials in that country have it much lower. Some of these claim the corn crop will be closer to 82 or 84 million metric tons. This would reduce the global corn supply by 390 million bu, and open the door for even more U.S. exports.
The reason that these stories have not received more market attention is that same as in the soy complex, as tightness in reserves is only expected to be temporary. If global growing conditions return to normal ranges next year we will quickly see corn production rebound. We are already hearing of countries such as Ukraine that will expand corn production next year by a significant amount. This has prevented the volume of speculative buying from happening that normally would take place.
China remains absent from the U.S. soybean market. Not as many analysts are concerned with this as expected though, as they feel China will return to the export market later in the marketing year. The question is the timing of when China is expected to return for soybeans. Some analyst feel this will happen right at the start of harvest and stress the U.S. export 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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