Now that the calendar has turned to February we will start to see more positioning ahead of the USDA’s outlook forum data. The data released at this forum contains the government’s first official look at new crop balance sheets on commodities.
Trade is fully expecting a bearish round of numbers from this group, but the real question is how much of the news has already factored into commodity values.
While the February outlook forum can influence trade, what is more interesting for trade are the March stocks and planting intentions reports. These numbers will help verify the usage data released in January.
The most interest will be on soybean inventory, as we have not seen demand slow on soybeans at all since the end of harvest. It is quite possible a bullish number in the March stocks report could initiate panic rationing in the soy complex.
Global corn demand is becoming a concern, mainly from Japan. Japan is the world’s largest corn importer, but in the first 11 months of 2012, Japan’s corn imports were down 2.3 percent from 2011.
This is especially alarming for the United States, where corn trade is down 91 percent from the previous year. Japan has increased its use of alternative feed grains products, cutting down on its corn usage.
Even though harvest is just getting under way in South America, concerns are already building over potential logistics issues. South American countries are expected to see their largest demand ever for newly harvested soybeans this year, as inventory begins to tighten in the United States.
In fact, we are already starting to see vessels line up for exports once Brazil’s soybeans make it to port. Brazil is currently forecast to export 2 million metric tons (mmts) of soybeans in February, and then see loadings jump to 5 mmts in March.
Today’s trade continues to be heavily influenced by weather. This is more from current conditions in South America, as those crops are entering some of their most critical time periods, especially Argentine corn. Argentina’s corn is pollinating, and any stress now could further reduce an already shrinking crop projection.
Worries also remain over the United States as well, as drought is lingering in the Plains states, with the spring planting season rapidly approaching.
We continue to see mixed demand on U.S. corn and soybeans. For the marketing year, the United States has already sold 908 million bushels of soybeans for export. This is running well ahead of last year, and close to the total volume of soybean sales expected for the entire marketing year.
Corn sales remain poor though, with yearly bookings a mere 283 million bushels. At this rate, U.S. yearly corn sales could be some of the lowest in decades.
The unknown on corn demand rests on whether poor exports can be negated by increased domestic usage. Ethanol demand has plateaued, but so far, the industry is consuming all of the corn it was expected to use.
The big unknown on corn use is feed, as the livestock industry is consuming much more corn than expected this year. These uses may be just enough to offset slow exports, but even that may not be accurate, given the onset of South America’s harvest and the cheaper grain that will provide the global market.
Karl Setzer is a commodity trading advisor/market analyst at Maxyield Cooperative. His commentary and market analysis is available daily on radio, 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.
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.