The USDA made moderate reductions to both old- and new-crop corn carryout projections in the June supply and demand report. Old-crop ending stocks decreased 80 million bushels to 2.1 billion bushels total, and new-crop decreased 105 million to a 1.57 billion-bushel total.

These were both larger declines than what trade was expecting. World corn ending stocks were cut 4.46 million metric tons (mmts) due to the smaller crops in South America and the elevated demand for U.S. corn.

Reductions also took place in the U.S. soybean balance sheets. Old-crop stocks were reduced 25 million bushels for a 505 million-bushel total, and new-crop decreased 30 million to a 385 million-bushel total.

As with corn, these reductions dropped ending stocks below the average trade guess. These domestic declines were offset by an increase in global carryout of 1.5 mmts from the larger Brazilian crop.

Little was changed in the wheat balance sheets. Old-crop stocks increased 20 million bushels, while new-crop declined 9 million. While these were minimal changes, the simple fact that wheat stocks did not increase gave the complex some much-needed support.

The firm CONAB also updated its Brazilian production figures this week. CONAB is projecting a soybean crop of 118 mmts this year, up 1 mmt from its May estimate. The group’s corn estimate is now at 85 mmts, a large 4.2-mmt decrease from May.

On the year, Brazilian soybean production is expected to increase by 3.5 percent, while corn production will be down 13.1 percent.

We are already starting to hear conflicting opinions on what we could see for corn yields this year. Just because planting has been delayed in some regions of the Corn Belt does not necessarily mean yields will be down.

This was proven in Illinois last year, where planting was delayed, yet the state still averaged a record 201 bushels per acre. Near-perfect growing conditions once the crop was planted was the reason for the high corn yield.

There are groups agreeing with this possibility. One in particular is gaining attention by claiming there is a 50 percent chance the U.S. corn yield will fall between 1 percent under to 4 percent above trend. They add there is a 25 percent chance of a corn yield that could be even higher than this.

On the down side, it is only believed there is a 10 percent chance the U.S. corn yield will be greater than 5 percent below trend at this time.

This year’s crops are also progressing at a faster-than-average rate. There were concerns that the slow start to planting could mean crops would mature later and be affected by late-summer heat. While this is still a possibility, the chances of it happening are diminishing.

This does not mean crops will not face adverse weather, but rather that the need for risk premium has been reduced at this time.

A concern in the market that has passed is the possibility of acres shifting from corn to soybeans. Initial delays sparked concerns that a large number of acres would shift from one crop to the other. It is now believed that any shifting will be minimal and confined to small regions of the Corn Belt.

Trade is even less worried about spring wheat acres shifting to alternative crops, which has been a benefit for the soy complex.

We are starting to see more positioning ahead of the U.S. planted acreage revisions that will be released at the end of the month. Private parties have been releasing their estimates and are calling for upwards of 1 million more corn acres than in the March projections. Soybean acres are thought to be 400,000 acres higher.

If correct, this will take away some of the need for higher yields to satisfy demand, especially on corn.

Just as much interest is on what we could see for stocks at the end of the month. Farmer movement has been sluggish in recent weeks, giving the indication we could see high on-farm reserves. While possible, a lot of inventory moved early in the quarter, especially soybeans.

This stocks report tends to receive more attention than the others, as it gives us a clearer indication of final carryout.

Chinese soybean demand remains less than what trade was using in global balance sheet projections. One reason for this has been an increase in use of domestic reserves, but so is a reduction to usage on a whole. Hog margins are negative at this time, which has slowed expansion and eased up on the demand China was seeing for soy meal. Until this consumption rebounds, the ever-growing demand base we have seen in meal is likely going to slow.

An even bigger influence on Chinese soybean usage is the elevated production of ethanol and the resulting distillers grains. China has increased domestic production of ethanol to use up its burdensome corn reserve and, in doing so, has produced 30 mmts of DDGs.

Analysts claim this could eventually offset nearly 10 mmts of soy meal demand. When combined with elevated domestic soybean production, this could lower imports even more.

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.