By KARL SETZER
Market Analysis 

The volatility we have seen in the futures market recently is unlikely to subside anytime soon. On the bearish side of today’s market we are dealing with elevated ending stocks and favorable weather outlooks. The bull side of the market keeps pointing out that low prices will attract buyers, and there is still a need for risk premium in today’s values.

The high value of the U.S. dollar and mixed technical indicators are also causing choppy futures trade at the present time. Not only are futures likely to remain volatile, but so is the cash market.

Some buyers across the interior market have needs covered from now until mid-summer. Others are still going hand-to-mouth and are being forced to push for coverage. This could easily be a trend in the market that lasts into later summer months and possibly until harvest.

One factor limiting any buying in corn right now is uncertainty over future supplies. Current demand projections indicate the USDA may be overestimating corn demand by 250 million-300 million bushels. Some models can make the case that old-crop demand is currently 500 million bushels too high.

Not only can this weigh on old-crop corn values, but reduce worries over a potential decline in new crop production as well.

There are also opinions in the market that old-crop soybean exports are being underestimated, and ending stocks will likely be reduced. The same demand is not being shown for new-crop soybeans, though, as better than expected soybean yields in South America have generated additional competition for the United States in the global market.

Not only are soybean exports up from a year ago, but so is crush. At present soybean crush is running 14 million bushels ahead of a year ago. This high crush was needed to refill the nation’s supply line following last year when reserves were nearly depleted.

The question now is if this rate of crush will continue as inventory is filled, especially if cancelations take place to soy meal sales.

While the soy complex does have plenty of supportive news, it also has plenty of limiting factors as well, the main one being even if ending stocks are reduced to 350 million bushels, as some economists predict, it is still four times the volume of last year’s carryover. We are also seeing higher than expected yields come out of South America, boosting global soybean reserves.

There remains a large amount of last year’s corn crop being held in storage, with some analysts believing farmers still own 50 percent of last year’s bushels. The last time farmers were holders of this much corn was in 2010.

The concern with this decision to hold corn is sooner or later it will have to move, and this could easily generate logistics issues if movement happens close to harvest. Another worry with this decision is what quality the corn will be in when it finally does move.

Trade remains focused on this year’s corn planting pace. In recent years with fast planting paces on corn, we have had a strong tendency to see higher planted acres than predicted in March.

The five most recent years in which corn planting reached 70 percent by the first week of May saw acres increase from March to June, from a low of 200,000 acres to a high of 1.7 million acres. This historical tendency has greatly reduced concerns over the possible loss of corn acres in the Delta region.

Now that corn planting is well under way, the debate has begun on how an early planting pace impacts yields. History shows this is a touchy subject, with few supportive facts to indicate yield potential. For example, in 2012 corn planting was one of the fastest in history and final corn yield was 122 bushels per acre because of late season drought.

Last year was one of the slowest on record for corn planting, and final yield was the highest ever at 171 bushels per acre. There are several other factors than planting that will ultimately determine final yield – primarily growing season weather.

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.