The USDA Supply and Demand report on Wednesday saw only an increase in corn carryin from last year due to a 25 million decrease in US corn use for ethanol. This caused a small increase in estimated carryout. Globally, production estimates are up 3 million metric tons (mmt) due to the record production levels seen in South America.
Trade is currently worried about the possibility of a large carryout resulting from limited acreage reduction, reduced exports, and lower feed use. Trade is looking to the next report which is the June 30 stocks report in which we will need to see record feed usage to keep us on track with the USDA S&D report. If these values fall short, they more than offset any reductions in planting acres and we may have to rethink the corn balance sheet.
Some risk premium is being added to the market with worries of hot temperatures adversely affecting corn pollination in Georgia and the Carolinas. When coupled with the increasingly record short fund position of 167,000 contracts, we could see a significant rally. Trade is still concerned with this year’s weather patterns looking similar to 2010 when it started out really wet in the spring and then turned out hot and dry in the latter half of the summer.
The USDA Supply and Demand report was more bearish than expected on Wednesday with US yield estimates increasing from 43.5 bu/acre to 44.2 bu/acre. This coupled with an increase in carryin of 3 million bushel results in an overall carryout increase of 21 million bushel tempered only by a small increase in feed usage of 15 million bushel. This caused values to decline $0.17 on Wednesday and another $0.07 on Thursday pulling corn down with them.
Rains are currently plaguing wheat harvest as well as wheat production with rust and other diseases being reported. In the panhandle of Nebraska we are seeing rust, wheat streak mosaic, and barley yellow dwarf due to wet conditions impacting the plant and preventing spraying of such diseases. There is still concern of dry areas in Russia and Canada that is bullish for the market. Wheat that is being harvested has quality issues which is also bullish.
Look at the Nebraska wheat report here.