As we approach the fall harvest season, more terminals are evaluating their storage space. Nearly every terminal in the Eastern Corn Belt claims they will have plenty of space for new-crop grain, as many never went full last year because of a small crop. The Western Corn Belt also claims to have adequate storage space, as commercial grain has plugged the end user market in recent weeks.

Given the low volume of grain in the supply line, much of the early-harvested corn and soybeans this fall will make it directly into to the processing market rather than storage.

The U.S. export picture remains mixed on both old and new crop. New-crop sales of corn are already at a 10-year high, and soybean bookings are the greatest ever. While this seems positive, it is also likely the United States will carry several old-crop sales into new-crop delivery. This is especially true on soybeans, where buyers such as China have been cancelling purchases in large volumes.

A large amount of double-cropping has taken place in the U.S. this year. This is mostly in wheat-producing regions of the Midwest, where that crop was followed by soybeans. While it is questionable as to how good these soybean fields will yield, it is still additional inventory the USDA may not be using in supply and demand figures. This could surprise trade this fall and greatly impact our new-crop balance sheets.

Trade continues using crop condition ratings to try to determine final yields, especially on corn. This year’s corn crop rating is under last year’s, so many traders expect a lower yield than last year.

History does not indicate this is accurate, though, as in seven of the past eight years the final corn yield estimate in January was equal to or greater than the yield predicted in May, according to the risk management firm Market Wise.

Private crop tours of the Midwest continue to give an extremely wide range of yield possibilities. The range in yields is close to 10 bushels per acre on corn and five bushels on soybeans. There are also claims corn did not pollinate evenly, and quality will be an issue at harvest time. These reports are not surprising, as every year we have wide variances in crop stands, but the need for large yields is making them more of a topic this year.

While most attention is on the upcoming harvest season in the U.S., South America is making preparations for its planting season. It is believed Brazilian farmers will produce a record 75.2 million metric tons (mmt) of soybeans this year from an increase in planted area.

Brazil is also forecasting large soybean exports at 35.6 mmt, with 60 percent going to China. Brazil’s soybean crop may be even larger if it can reverse its recent trend of declining yield from year to year.

There are also concerns over what could happen in the U.S. next year unless rains fall between now and then. The country broke a record in July with 12 percent of the country experiencing “exceptional” drought. On a whole, nearly half of the U.S. was in a drought situation in July, and precipitation has been limited since. Unless this situation corrects itself soon, next spring’s planting season could be affected.

The flooding that has taken place along the Missouri and Mississippi rivers this year may have longer-lasting implications on crop production than expected. Water levels have just started to recede in some of these locations, which means farmers will have a hard time starting any type of debris clean-up prior to the onset of winter.

As a result, much of the debris will not be cleaned up until next spring. This could delay next year’s plantings, and possibly eliminate them altogether for the second consecutive season.

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.