By KARL SETZER
Market Analysis
The United States continues to see limited interest in its new-crop corn and soybeans from the global market. One of the primary reasons for this is price, as buyers can still secure needs from other sources at a sharp discount to U.S. offerings.
Another is quality, as some buyers are worried over the state of inventory still being held in the United States and how it may be blended into new-crop bushels. Some buyers are also worried over potential logistic issues if a large volume of this year’s crops need to be dried prior to export.
The most competition the United States is seeing in the global soybean market is coming from South America. Not only are buyers still opting for South American soybeans for this fall, but some are now showing interest in covering spring months as well.
This is not uncommon, as spring is when South America’s new-crop soybeans are normally ready for harvest and export. What is a little surprising at this time, however, is that buyers are taking soy meal as well as whole soybeans.
This change in buying habits from the global market is part of a shift that will likely impact world trade for the foreseeable future. Recent improvements to ports, increased yields and lower prices have now made South America the primary supplier of soybeans to the world market. South America’s market share will only increase as improvements continue to be made.
Another reason buyers could be showing little interest in U.S. offerings is that they simply have needs covered. While buyers have not been actively covering needs with U.S. corn and soybeans, they have been with inventory from foreign countries.
The exchange rates we have seen in the global currency markets have also swayed buying interest away from the United States in recent months. It is now possible importing countries will just use the United States to cover voids in what other suppliers already have sold, primarily on soybeans.
We are starting to see more preparations made for the fast-approaching harvest season here. This includes seeing remaining old-crop bushels moved from both on-farm and commercial storage. We are also seeing more interest in weather models and if harvest delays may develop, as some analysts believe. As always we are also seeing more interest in logistics and if delivery issues may develop.
Trade is starting to predict what we may see for crop quality this year. It is not out of the question maturity will be uneven this year across the Corn Belt. As a result, a larger portion of this year’s corn crop may need to be dried prior to being placed in storage. There are also some concerns that current conditions may impact crop quality, mainly test weight.
We continue to see debate in the market surrounding country movement ahead of harvest. Analysts seem to be split in their opinion over how much old crop will move and how much will be held in to the new-crop year. We are seeing much less interest in movement at this time, especially after the recent break in values.
A recent increase in on-farm storage capacity has made the holding of stocks more likely. The fact some farmers will need new-crop inventory to blend with lower-quality old crop is also preventing movement at this time.
More attention is starting to be placed on the deferred bids in today’s market. At present new-crop corn/soybean price spreads favor the production of corn in the United States. As a result some economists believe soybean futures need to rally, to prevent acres from slipping into corn production.
While this may be true to a point, there is also a concern if soybean futures rally now it will encourage production in South America rather than the United States.
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.
