While there is plenty of time in the new crop marketing year for adjustments to take place, it appears as though for the first time in seven years corn demand will outpace production. For the season, corn usage is expected to be 1.13 billion bushels greater than production.

 

This is mainly from smaller crop in the United States. While this will not put the global market in a rationing situation by any means, it should be enough to help support futures at current levels.

We are starting to see a difference in outlooks for the U.S. export market. Initially it was thought corn exports would remain high, but some analysts now feel these could decrease as the marketing year progresses. Contrarily, there are now opinions U.S. soybean sales will remain stronger than expected for the remainder of the year.

Even if we do see these changes take place, it is unlikely they will show up in balance sheets until later in the marketing year.

Global GMO production continues to increase, especially in the United States and Brazil. GMO crops were grown on 457 million acres in these two countries in 2016. This was an increase from the 444 million in the previous year.

Increased use of GMO technology is a large part of the elevated production we have seen in these two countries. The wet soil conditions across parts of the Corn Belt are causing more concern than just planting delays. There are thoughts that regions which have received excessive rainfall have had fertilizer loss as well. While fertilizer can be reapplied, doing so will raise the cost of production for the crops.

Many farmers may opt to forego the extra application, which can easily reduce final yield. Not only is planting taking place in the United States, but in China. Chinese farmers are moving forward with their planting season, and claim they will seed 9 percent more soybean acres than in 2016. This is expected to reduce other crops, mainly corn.

Corn acres in China are now forecast to be down 4 percent this year. By making this change, it is hoped China will be able to work through more of its domestic reserves.

South American farms are also looking forward to their next production season. Even with less-than-favorable returns, farmers in Brazil claim they will plant more soybeans next year. This is a factor that has kept pressure on the  U.S. soybean market in an attempt to limit shifting. Hopes are if soybean futures remain depressed, farmers in those countries will be less interested in elevating production.

Uncertainty surrounding the U.S. wheat crop continues to rise; this is not just on yield, but on crop quality. There are concerns that recent weather and growing conditions will impact wheat protein levels, and reduce it to feed quality. This could obviously increase the competition the U.S. corn market may see, both domestically and for exports.

Even though crops are still being planted, producers across the Corn Belt are being encouraged to scout fields for insects this growing season. A combination of a mild winter and a cool, wet spring have elevated insect populations.

Now that temperatures are warming, these insects will become active in freshly planted fields. Scouts claim fields that had heavy cover crops may be more susceptible for high insect populations.

Warmer temperatures also mean farmers need to more closely monitor their on-farm storage facilities. Now is the time of year when bins start to warm  and fungus can quickly spread. This is especially the case in any inventory that may have taken on moisture over the winter months.

Checking bins on a regular basis and moving questionable inventory is the easiest method of preventing revenue loss from happening.

We are at a stage where we will start to see a shift in market focus. For the past several weeks trade has been focused on spring planting. Now that we are seeing planting wind down, more attention is being placed on crop development. This can make the market even more sensitive to adverse weather conditions and forecasts.

We are also starting to see more longrange weather outlooks released, and some of these are covering the majority of the U.S. growing season. Models are now indicating the Western Corn Belt and Plains should have normal temperatures and average or above precipitation through August.

The Eastern Corn Belt and South are forecast to have warmer but drier conditions. So far, these models have failed to generate any fresh buying interest in the market.

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 ommentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.