One thing that is consistent with this year’s corn crop is inconsistency. Crop scouts report a wide variety of corn stands across the Corn Belt, with some regions through their pollination stage while others are just approaching it.
This may prevent the entire corn crop from being harvested in a narrow window, relieving stress on the nation’s infrastructure system. This could end up supporting the cash market, as delayed harvest may tighten cash corn supplies.

The possibility of seeing an early harvest in the United States this year is declining. End users had been hoping for an early harvest to help limit the amount they need to push bids to encourage movement of stored old crop corn and soybeans. A late start to planting, the need for replants in several regions and a slow start to the growing season combined to reduce the chances crops will mature in a short amount of time.

An early harvest may not be needed though, as the old crop inventory of corn and soybeans is likely to be larger than previously thought. A new crop corn use that is being heavily questioned by trade is ethanol manufacturing. In the July USDA supply and demand report, ethanol topped feed for the biggest corn demand for the first time in history, at 5.1 billion bushels.

This number is highly questionable, though, as the possible removal of subsidies and import tariffs could greatly change the industry’s profitability. It is also possible that any increase in ethanol manufacturing will simply offset reductions in corn exports.

The elimination of ethanol import tariffs may actually be beneficial for the industry. By eliminating this tariff, it will likely align the U.S. more closely with the Brazilian ethanol market. Brazilian ethanol is manufactured out of sugar, so the U.S. industry will actually benefit from high sugar prices.

The removal of U.S. ethanol subsidies may also increase the number of countries willing to import our fuel, even if the price holds steady.
Traders are becoming more optimistic over future U.S. feed grain demand following the latest cattle on feed numbers. Feedlot numbers are up as a result of poor pastures in the South because of drought, which will likely lead to increased feed grain usage.

Once this demand starts to build, it will be longer-lasting than most other grain uses. The question is how much traditional feed grain will be consumed, though, and how much alternative feeds such as wheat and distillers grains will find their way into rations.

All marketing year corn has suffered from cheap wheat making its way into feed rations, but now we are seeing other uses shift as well. One of these that has surprised trade in recent weeks is the ethanol industry. Some ethanol manufacturers in the Eastern Corn Belt have begun using 10 percent wheat in their processing to cut down on corn use.

Soybean use is also starting to be questioned, especially old crop crush for meal and oil. Analysts are quick to say the low crush volume is from low soybean inventory, but that may not be the case. Increased use of dried distillers grain in feed rations is displacing soy meal and, in turn, reducing soybean demand.

Forecasters are predicting an active hurricane season this year for the U.S. These forecasters believe the country will have 10 hurricanes in the Atlantic Ocean this year, six of which will be large.

Hopes are rising that if these storms do in fact make landfall or even come close to the U.S., they will bring much needed precipitation to drought-stricken regions of the Delta. While these storms do bring large amounts of rainfall, they offer little benefit to dry soils, as much of the rainfall tends to run off rather than soak in.

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.