By KARL SETZER
Market Analysis
Debate is taking place over how much of the corn and soybean crops would be affected by an early frost this year. The normal date for an early frost in the upper Corn Belt is between Oct. 1-10. Given current maturity rates, an estimated 1 billion bushels of corn and 350 million bushels of soybeans could be impacted by an early frost this year.
Weather models do not presently indicate abnormally cold temperatures, though, which is limiting these possible losses’ influence on trade.
Recent rains across the Corn Belt are causing concerns in some regions, and seen as a benefit in others. Concerns are mostly in soybean fields where sudden death syndrome is now being reported on a more widespread level. In other areas it is believed the moisture has been a benefit, mostly to pod numbers and weights. It would not be surprising to see elevated yield estimates because of this rainfall.
While trade continues to debate yields per acre, the bottom line in the market is total production and stocks-to-use. Corn production for this season is projected at 14 billion bushels, with a 14 percent stocks-to-use.
Soybean production is at 3.8 billion bushels, with a stocks-to-use of 12 percent. Historically these reserve totals equate to $3.50 corn and $10 soybean futures.
Despite lower values, Brazilian farmers are intending to increase soybean plantings this year. Analysts in the country claim plantings will increase by 4 percent. This would put the country’s soybean acres at 77 million.
A lack of alternatives to soybean production is the primary reason for the increased acres, as well as the fact soybeans can be double-cropped with corn in many areas.
There is also a difference in soybean profitability in Brazil from farm to farm. If farm ground is rented, breakeven at today’s soybean values is about as good as it gets. If land is owned, however, profitability is much higher.
Logistics also play a part in soybean profitability, with southern regions showing better returns due to lower transit costs.
Farmers in Brazil are expecting to see higher yields this production season. Weather in Brazil remains near perfect, and there is an El Nino system building. These tend to bring favorable growing conditions to South America, same as they do for the United States.
Analysts are expecting Brazil’s soybean yields to increase 10 percent as a result of these favorable weather conditions.
Chinese officials have announced the country will halt all research on genetically modified (GMO) crop development. The country will also discontinue licenses for GMO production.
This is negative news for the U.S. corn market, as it was hoped the GMO situation between the two countries would be resolved and corn trade would resume. Given the fact GMO corn production is rapidly increasing around the globe, this may make it difficult for China to import any corn to cover needs.
China is on path to produce an 11th consecutive record grain crop. This is creating concerns in China, as the country already has a record amount of grain in storage. China has been buying grain in an effort to support domestic prices, with purchases totaling $36 billion in the past two years.
This is generating concerns in China over how another record crop will be stored.
It is quite possible trade is not fully realizing how much grain China actually has in domestic storage. At present, China is holding an estimated 40 percent of the world corn supply, and expecting to expand upon this.
As a result, Chinese officials are going to expand storage capacity. While it is doubtful China will export any of this corn, it will greatly reduce any need to make imports.
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.
