By KARL SETZER
Market Analysis
While up considerably from a year ago, corn and soybean stocks as of June 1 were under trade estimates. Corn stocks totaled 4.47 billion bushels, compared to 3.85 billion a year ago.
Soybean inventory totaled 625 million bushels, well above last year’s 405 million. Wheat reserves on June 1 were above both trade estimates and last year’s 590 million bushels, at 753 million.
Acreage revisions came in close to trade expectations in the USDA update. The USDA now pegs planted acres at 88.9 million for corn, 85.14 million on soybeans and 56.01 million of wheat. Last year U.S. farmers planted 90.6 million acres of corn, 83.7 million in soybeans and 56.8 million in wheat.
The soybean acreage is being heavily debated, though, as that crop is still being planted and acreage loss is possible.
Now that these reports have been released, trade will return to monitoring crop reports and weather forecasts for daily market direction. Recent forecast models indicate cool, wet conditions across much of the Corn Belt as we approach the pollination stage of development.
Normally, these conditions would be considered bearish for market values. This year may be different, though, as most field scouts claim crops could actually use more heat units now than anything.
We are starting to see more of a variance in corn crop conditions between the Eastern and Western Corn Belt. States in the West now have some of the better ratings, while those in the East are starting to show stress.
The areas of the West that look the best produce 40 percent of the U.S. corn crop, while those that look the worst in the East produce 28 percent. The question now is what shape the remaining 32 percent of the crop is in, and if it will be good enough to make up for losses in other areas.
Even with thoughts of losing acres and potential yield loss, corn values have only shown moderate strength. This is from the pressure we have seen from the global side, where corn production is much less of a concern.
In the latest supply and demand report, the USDA only decreased global corn reserves 2 million metric tons (mmts) from this year to next. The primary reason for this is a 12-mmt increase to Chinese production, though – which is being doubted by several market analysts.
While global corn production is going to be large this year, many analysts are overlooking the fact demand will be high as well. At present corn demand on the year is forecast to increase 14 mmts from a year ago. This is positive, but is lower than the 24-mmt yearly increase from last year to now.
The greatest increase to demand is going to be to global feeding, as 3 mmts less wheat is forecast to be used for feed next year.
Trade also seems to be overlooking soybean demand. In the past month the world has seen record soybean demand of 25 mmts. This is a 15 percent increase from one year ago.
Over the past three months soybean consumption has increased a large 3.5 percent, indicating a yearly demand increase of nearly 9 mmts. Given this growth in demand, it is critical that the world keep expanding its soybean output.
The United States continues to struggle in the world market for export business. This is a result of foreign currency values being sharply discounted to the U.S. dollar, which encourages sales from other sources. The concern with this is that spreads have widened to a point where U.S. imports of some commodities make economic sense, primarily soy meal.
Even if this does not happen, the possibility and threat are negative for the soy complex.
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.
