We are starting to see a gradual shift in market attention from the old crop contracts to the new crop. This is mainly from the fact that while old crop inventory of corn and soybeans is going to be tight at the end of this marketing year, levels should be great enough to satisfy projected usage.
The concern now is with new crop production, which puts more emphasis on weather outlooks. This is why we see more market volatility from extended forecasts than current weather conditions.

There are analysts who believe trade should be paying closer attention to the old crop ending stocks projections on corn and soybeans than it is. One reason this is not receiving more attention is from the fact carryout projections seem to have leveled out for now.

Another is that while the old crop marketing year ends on Sept. 1, it is quite likely we will already see new crop harvest activity by then. History indicates there are 11 southern states that tend to harvest corn prior to Sept. 1.
Given this year’s conditions and timing in these states, they could easily deliver 475 million bushels of new-crop corn during the old crop months. If correct, this would make corn inventory on Sept. 1 closer to 1 billion bushels more than the 600 million bushels that some analysts are predicting.

The market is still aware of what impact corn planting delays could have on carryout. If planting is delayed by as much as one week, it will likely delay harvest by one week as well.

Current corn usage in the United States totals 250 million bushels per week. At this rate, the United States would deplete its 675 million bushels corn reserves with a combined three week delay to either planting or harvest.

Not only are weather issues affecting crop production in the United States, but the cattle industry as well. Drought in the South has caused many livestock producers to already start cutting down on cattle numbers.

Flooding in the North is having the same impact in cattle placements. In turn, these reductions will likely lead to lower than expected feed grain usage.
Trade is starting to look forward to the June acreage report. In five of the past seven years, the USDA has increased corn plantings from the March to the June report, with the average increase being 1.8 million acres.

The increase this year may be even larger given the fact corn futures favor the production of that crop by $80 per acre. The addition of these acres makes it more likely the United States will be able to rebuild corn reserves next year.
Conversely, the United States tends to see a reduction to soybean plantings from the March to June report. The average decline in soybean plantings is 1.5 million acres. This is concerning for trade, as soybean carryout this year is forecast to drop to a minimal level, and already be tight next year as well.
The reason this is receiving less interest is from the fact buyers have other choices for soybeans, mainly South America. There is a possibility that trade is being misled on the actual amount of distiller grains being consumed. Compared to a year ago, U.S. DDG usage is only up 3 percent. At the same time we have seen some buyers, including China, back off on their use of the ethanol by-product in recent months.

While we have seen some use of the DDGs decline, the lack of significant stockpiles of the commodity indicate it is being used somewhere.
Some economists believe recent market volatility is not as much from what is taking place now, but what could impact the markets well into the future.
By the year 2050 the world is going to need 70 percent more food to feed an ever-growing population. In order to accomplish this, the market is rallying now to push production into regions of the world such as Brazil, where many acres of fertile land lie dormant. Today’s higher market values also encourage farmers to produce as much grain as possible on the land they do have.

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 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.