New Year Expectations - Thursday, 29 December 2016

The trade is looking ahead to predictions from the USDA regarding new crop production and carryout.  Right now it looks like the agency is planning to use a corn yield of 170 bushels per acre which calculates to approximately 14 billion bushels of corn production for the 2017 crop season.  So just how low would acres for 2017 corn production need to be before the market would respond?  According to some analysts the U.S. needs to see corn acres fall to around 85 million before the outlook would become “bullish” for corn prices.  That would require a -10 million acre drop from 2016 economists feel that because of this we are unlikely to see prices above the $4.00 per bushel level for quite some time. It is believed that with global inventories at their current levels it would take a year of production problems to rally prices especially for corn.  Since soybean balance sheets are tighter and demand remains high it would take less of a production issue to start a rally in futures prices for soybeans.

Looking on the positive side, corn exports remain strong and are the most competitively priced in the global market and that is expected to remain the case through June. In addition ethanol manufacturers have had some of their best profit margins that they have seen in many months as a result they are offering premiums to producers to encourage farmer selling of stored grain.

Soybeans sales have been solid due to the profitability for the producer of that commodity.  While there continues to be talk about weather concerns in parts of South America early soybean harvest has begun and yields have been averaging over +60 bushels per acre which is double the amount seen in some of these areas a year ago.  Even though their harvest is underway the U.S. remains the cheapest source of soybeans at this time and that is expected to continue through February.  The price difference favors the U.S. by $.10 per bushel which attracts buyers to the U.S. as does the tendency for delays at South American ports.

These are some of the headlines that the markets are following:

  • China is going to raise the ethanol import tax to 25%. Chinese crush margins are falling.
  • South Korea is planning to destroy 15% of the countries poultry flock
  • Japan has been purchasing corn from Russia
  • July corn is currently -$.07 cheaper than at this time a year ago.
  • July soybeans are currently +$1.66 higher than at this time a year ago.
  • Funds are: Short 106,000 corn contracts, and 118,000 wheat contracts. Funds are long 106,000 soybean contracts.

DTN meteorologist Bryce Anderson has issued his outlook for spring 2017 planting for the North Central Corn Belt.   He believes that parts of northeastern Iowa and southern Minnesota and into some areas of Wisconsin could be impacted by high levels of soil moisture. This same area has been dealing with elevated soil moisture for the past 10 years with the exception of 2012. “That of course is a very high producing sector of the Corn Belt and there’s been some planting problems during the springtime and I think this is likely to happen again.”  Ample soil moisture is found in much of northern and eastern Iowa and northern Illinois, and parts of Indiana as well as Minnesota and Wisconsin.  Due to these elevated moisture levels he warns producers that, “it won’t take much rain to bring those levels over the top.”

Another nation-wide blast of Arctic air looks to be headed into the U.S. next week.  Regions in the western portion of the country can expect the arrival of the cold air mass January 1st, the Midwest by January 4th and it should reach the East Coast of the U.S. by January 6th

The map below shows the expected precipitation from today, December 29th, 2016 through next Thursday, January 5th, 2017.




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