The markets favored corn several months ago due to robust demand and manageable supplies. In recent weeks, the market seemed to shift favor to soybeans as growers indicated they would be planting more corn in response to those prognostications. In the Delta, there was also lack of opportunity in cotton.
Now we hear of wet weather impacts on corn planting in the Delta, increased Chinese corn exports and disruptions in U.S. exports of poultry to China, which threaten to lower U.S. feed demand for corn.
The result was an increase in U.S. corn carryover of an estimated 25 million bushels in USDA’s April supply and demand estimates.
China’s exports were sales of its low quality corn to Asian neighbors – Taiwan, Japan, North Korea and South Korea.
“Those countries are a large part of our exportable corn market,” said Tim Hannagan, head grain analyst, Alaron Trading. “So we can’t see the corn ending stocks decrease in the months ahead. In fact, we may see it increase.”
On the positive side, while the market is nervous about China’s wavering position on U.S. poultry imports to the country, Hannagan believes that China will back off the restrictions simply because it needs the product.
Weather has delayed corn planting in the Delta this spring, meaning Delta growers could end up planting less corn and more soybeans. But that’s not likely to have an impact on corn prices. Only about 10 percent of U.S. coarse grains are grown in the southern Delta and Southeast states. Planting is expected to proceed as planned in the Corn Belt states.
USDA also projected higher than expected soybean production for Brazil this coming harvest season, which could put a damper on that market.
The trade was not expecting this, according to Jack Scoville, vice president, Price Futures Group. “Many had been expecting Brazilian soybean production to drop a million or two tons, but USDA left that figure alone.” In addition, South America is expected to add 6 percent to 7 percent to its total (all crops) farm acreage by next planting season.
Scoville expects a sideways to weaker tone in the soybean market in the near term. “But this (April 10 supply and demand) is the last report before USDA begins releasing information on new crop acreage and production. So weather should soon start having an impact on price levels in the United States.”
Analysts also suggest watching the U.S. wheat crop very closely as it could impact other markets.
In the April report, USDA increased estimated ending stocks for wheat by 10 percent, a significant number. “That’s quite a bit more wheat than we had a month ago,” Hannagan said. “World production is looking a lot better in some competing countries.”
The winter wheat crop is about 67 percent of total U.S. wheat production and is harvested in late May and June. In its last crop condition report, USDA noted that only 31 percent of the crop is rated in good to excellent condition versus 44 percent a year ago and 60 percent for the two years preceding.
“Obviously, there is not going to be a lot of wheat around for milling purposes,” Hannagan said. “So corn’s biggest problem when wheat is harvested is that there is going to be a lot of feed quality wheat to feed. So wheat could compete with corn.”
The analyst said to watch the weather in the Western Plains for wheat, April weather for corn and May weather for beans.
“Wheat is and has been in a weather market and that will continue,” Hannagan said. “We have a real chance to see a significantly lower hard red winter wheat production this year if the poor weather continues.”
In the April 10 supply and demand estimate, USDA pegged ending stocks for soybeans at 265 million bushels, unchanged from last month’s estimate and up from last year’s 248 million bushels. For corn, ending stocks are estimated at 1.621 billion bushels, up from last month’s estimate of 1.596 billion bushels and down from last year’s 1.899 billion bushels. For wheat, ending stocks are estimated at 773 million bushels, up from last month’s estimate of 701 million bushels and down from last year’s 876 million bushels.