No changes took place to the domestic corn balance sheets for old or new crop in the June supply and demand report. This left old-crop ending stocks at 2.29 billion bushels and new-crop at 2.11 billion.

 

We did see a change to the global side, though, as stocks decreased 1 million metric ton (mmt) from the May figure. This is not that concerning, as reserves are still more than adequate.

We did see changes to the domestic soybean balance sheets, but these were minimal. The USDA reduced old-crop soybean crush by 15 million bushels, which put ending stocks at 450 million. This carried directly into new-crop ending stocks and increased that figure to 495 million bushels.

The USDA increased the global soybean carryout figure to a large 92.2 mmts in response to larger crop estimates out of south America. Wheat balance sheets were also mostly unchanged. Old-crop U.S. wheat carryout is projected at 1.16 million bushels, a minimal 2 million-bushel increase from the May estimate.

New-crop ending stocks are now projected at 924 million bushels. The world wheat supply is also forecast to increase by 3 mmts to a comfortable 261 mmts total.

We are now at a critical period for planting across the Corn Belt. This is because we are at the stage where many farmers in the wettest areas can take prevent plant insurance if they so desire.

There are thoughts this will reduce the number of corn acres planted in the United States this year, and possibly increase soybean acres. While this may be true, it appears any shifting of acres will be minimal.

Ethanol production is giving trade mixed signals. For the year ethanol production on a whole is up 5.5 percent from a year ago. At the same time, ethanol reserves are nearly 10 percent greater than last year.

This has generated thoughts that production will decrease as the year progresses, and lower corn usage from the current 5.5 billionbushel estimate being used in balance sheets.

More trade focus is being placed on the dry conditions in the Dakotas and what they mean for production, mainly on corn. The only two drier springs than this one were 1980 and 1988, according to data from F.C. Stone.

Corn yield was sub-trend in both of those years, with 1988 seeing a final yield that was just 88 percent of trend. A repeat of this deviation would remove 110 million bushels from the U.S. crop. A question in the market recently has been why we have not seen more reaction to weather issues across the United States as a whole. This is mainly from the fact that today’s crops are able to better stand adverse weather than those planted just a few years ago.

There are several years in recent history where less-than-perfect weather has had little impact on final production. As a result, traders are more hesitant to add risk premium into futures values.

Now that we have started to see futures react to weather conditions, the primary question is how long we may see values appreciate. While every year is significantly different, last year our weather market lasted six weeks and added 64 cents to corn values.

The prior year, corn futures rallied for three weeks but gained 76 cents. One major difference between those years and our current year is the greater abundance of corn inventory to cushion any possible shortfall in production.

Trade is starting to focus on how much replanting has been done across the Corn Belt. In the state of Indiana alone it is being reported 1 million corn acres have been reseeded. This replanting could easily delay crop maturity, and make the crop susceptible to late-summer heat. We could easily see yield affected, as a result.

The world commodity market is going to see elevated competition from Brazil this year for exports. Brazil is expected to export 234.3 mmts of commodities this year, compared to 186.6 mmts a year ago.

This is the result of a rebound in corn production and a larger soybean crop. This means all other sources, including the United States, need to be more competitive on price than in the past to maintain a share of the global 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 commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.