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Irma’s after effects less impressive than Harvey
The United States is again becoming competitive in the global soybean market. Right now we are equal to Brazil on soybean offerings through October. This spread favors the United States by 10 cents during the month of November.
 
The only question now is how much coverage buyers still need for those months given the short time frame we are in for sales.

Debate is growing over Chinese import purchases of soybeans from the United States. At the present time China has only booked 13 percent of the soybeans from the U.S. that it did a year ago. This is giving some analysts the idea that we will see a large volume of buying from China in the future, as needs are covered. While this is possible, it could also be a sign of just how much soybean business China has shifted to South America.

Hopes are that the narrowing of the price spread between the U.S. and South America will benefit sales. We are seeing a difference in opinion when it comes to U.S. export totals.

This difference comes from the accuracy of weekly export loading totals, versus Census export loadings.

When these two are looked at more closely, it appears as though U.S. corn loadings this marketing year will top expectations by 50 million bushels.
 
When doing the same for soybeans, it looks as though loadings will  fall 50 million bushels short ofexpectations, which will likely lead to old-crop sales being rolled forward to new crop.

Dry conditions this summer have impacted more than just crop development. Water levels on some rivers have dropped to levels that are affecting barge movement. Barges have had to limit their draft in some regions, which is starting to increase transit costs, lower Gulf reserves and support basis. If this continues, it could start to impact demand for U.S. offerings in the global market.

There are analysts who are already looking forward to next year’s production season in the United States. Much of the talk surrounding this has been on acres, but we are now hearing debate on input usage as well.
 
Given the ongoing depression incommodity values, there are reports that many producers across the United States will reduce their input usage this coming year. While this may save a farmer on input costs, there is also the possibility of yield loss.

Any reduction to inputs this coming year may also mean a farmer will have to apply additional inputs next year to make up for it, mainly fertilizer.

We keep hearing of huge corn reserves in the global market, but analysts are starting to question where this grain is being held. In the U.S. and South America we know that farmers are holding the vast majority of corn reserves.

In countries such as China and Ukraine there is less known about corn reserves. As a result, some analysts are starting to doubt the huge corn inventory data being talked about.

One of the biggest questions in the market right now is how much downside risk there is to futures. While the answer to this question is unknown, some analysts feel any downside risk is limited. This is because compared to recent years there is not as much negative news in the market at the present time, especially when it comes to production.

Yields are much more variable this year than in recent years, mainly last year. While this is true, the fact the United States has huge old-crop reserves to work through may limit upside potential, as well.

One big difference between this year and recent years is in basis. Basis has remained relatively firm this year, even  with large stocks-to-use numbers. This is because farmers have been reluctant sellers all marketing year and not sold any more inventory than absolutely needed. Buyers have been forced to push their bids to secure coverage because of this.

The windows of opportunity this has created have been very narrow, though, as buyers do not want to pay any more for needs than necessary.

There remains a considerable amount of uncertainty over the U.S. farm economy. Commodity values have been depressed for the past several years, and indications are this will continue for at least another year. Large crops have helped offset the low commodity values, but even this is not as much of a benefit as it has been.

As a result, lenders are starting to report a rise in loan defaults, although the number remains well below historical averages.

Karl Setzer is a commodity trading advisor/market analyst at MaxYield Cooperative. His commentary and  market analysis is available daily onradio, in newsprint and on the Internet at www.maxyieldcooperative.com

The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.
9/13/2017