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Weather, demand and planting concerns converging on market
More concerns are being voiced over the possibility of delayed corn plantings this year. Trade is starting to compare this year to the ones of 2008 and 2011. In those crop years 10-13 percent of the nation’s corn was planted by late April, a pace which could be easily seen this year, as well.

Corn futures in both of those years traded sideways from this point of the year forward until yield potential could be better determined.
Soybean futures have fallen under considerable pressure lately, even with tight carryout forecasts. This is from dropping demand in China, the world’s leading soybean importer.

China has had disease cut its hog herd in recent weeks, and now there are concerns the same could happen to the country’s poultry industry. If correct, this could greatly impact not just the United States, but the entire world soybean market.

Brazilian officials have increased that country’s corn crop production estimate. The country’s second corn crop looks healthy heading into the critical grain filling stage, according to field scouts.
It is now believed this year’s corn crop could top last year’s record production. The USDA currently has Brazil’s corn production pegged at 72 million metric tons (mmts), but Brazilian officials have it closer to 76 or 77 mmts.

While Brazil’s corn crop does in fact look good at this point, there is plenty of time for yield loss. The most critical time frame for corn yield determination is still in front of the crop.

If adverse weather hits the country in the next few weeks, yields will likely be jeopardized. A late planting season to the second crop of corn is also increasing the chances of some yield loss.

The reality of large corn production in Brazil, as well as in all of South America, could be negative for those countries. Brazil typically uses 52 mmts of corn domestically. The remaining bushels will be exported, but given today’s futures market, these offerings may not be competitive. This could cause a build in Brazil’s corn inventory and disrupt future grain storage needs.

The U.S. ethanol industry is giving trade mixed signals. Manufacturing margins have greatly improved in recent weeks following the drop we have seen in corn values.

At the same time, ethanol blending margins have eroded because of a declining energy complex and lower gasoline demand on a whole. This means we could see an increase in corn demand by the industry, but only for a limited time.

Another market factor being influenced by the U.S. ethanol industry is distillers grain (DDG) production and demand. An increase in ethanol manufacturing will in turn mean more DDGs to compete with corn.

DDG values have also collapsed in recent weeks following the setback we have seen in corn futures. DDGs are now back to levels not seen since June 2012, prior to the drought that impacted last year’s corn production, and market values.

Weather continues to give today’s trade mixed signals. We continue to see precipitation systems move through the United States, replenishing soil moisture reserves as they do. At the same time, planting is not taking place as fast as what we have seen in recent years.

Agronomists are quick to point out plantings are not necessarily delayed, though, which is preventing a reaction in the futures 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
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.
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.