We are now approaching the stage where the planting pace on corn becomes more of a market topic. History shows that if the U.S. corn crop is 70 percent planted by the third week of May, very few if any acres shift to alternative crops. At the same time, if the U.S. corn crop is more than 70 percent planted, it is not uncommon to see more corn plantings. The debate will now shift to what impact the planting date will have on final yield, as some analysts believe later-planted crops tend to have lower yields.
While possible, we need to remember that planting dates are just one factor in final yields. Many times, especially in recent years, we have seen favorable late-season weather give us record yields, even with questionable starts.
This is also the stage of the year when more attention is placed on growing season weather forecasts. Long-range maps indicate benign growing conditions for much of the United States this year. This is not surprising given the high chances for an El Niño weather system to be in place. The U.S. is also going into the growing season with soils above 90 percent adequate on moisture. These conditions and outlooks will temper any short-term adverse weather issues.
It is becoming more apparent that yearly export sales from the United States will not reach expectations. At the present time, U.S. export sales trail last year by 350 million bushels on soybeans and 180 million bushels on corn. While lower exports have been predicted, these are larger declines than forecasted. Given these totals and historical trends, the U.S. will likely miss U.S. Department of Agriculture yearly export estimates by 150 million bushels on soybeans and 80 million bushels on corn.
These reductions in exports are the result of growing global supplies, which is giving buyers more options for purchases. This is especially the case on soybeans. Not only is global soybean production rising, but demand is slowing at the same time. The most attention on soybean balance sheets is on China. Economists are predicting a 30 percent decrease to China’s hog production this year, which will in turn decrease feed grain demand.
There is a definite mixed opinion in the market over the future of U.S. pork trade with China. It is a well-known fact that African swine fever has reduced the size of China’s hog industry and that imports will be needed to satisfy demand. This is good news for the global market as trade is already taking place. U.S. industry officials believe this will be a great benefit for the U.S. pork industry, but others are not so sure.
Chinese officials have long-stated that they only want to import Paylean-free pork. Paylean is a feed ingredient that has the ability to increase rates of gain in hogs and bring them to market sooner. This has generated some concern over U.S. pork exports to China, although China has still made purchases from the U.S. The concern now is that China and Brazil are in trade talks, and pork is probably at the top of the topic list. This could easily cap any U.S. pork export business with China.
The greatest concern with Chinese trade is if soybean demand fades and pork sales are also kept to a minimum.
We are starting to see a unique development in the U.S. cash market. The U.S. is expected to have large carryout totals this year, especially on soybeans. It appears as though the U.S. soybean carryout this year will be twice what it was a year ago. In fact, it is not out of the question that U.S. soybean ending stocks may top 1 billion bushels this year. Even with these huge stocks, interior basis values are still tightening. This is from an unwillingness to make any sales at this time. The next big chance of country movement may not be until later in the growing season when new crop production can be better determined.
There is a rather interesting development taking place in the wheat complex that could end up being an issue all marketing year. The winter wheat crop is highly rated, which the market is viewing as a good sign for yields. While this may be true, there are concerns being voiced over the quality of the wheat, mainly protein content. This is from the lack of stress the crop has been subjected to this growing season. History shows that higher stress levels tend to lead to higher protein content in wheat.
This low protein could easily end up being a factor that is used against the U.S. in the global market if it proves to be accurate.
This commentary is the sole opinion of Karl Setzer, commodity market analyst with AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl at 989-506-1587 or firstname.lastname@example.org. You can also follow Karl on Twitter via @ksetzergrains.