We are now at a stage of the marketing year where fundamental interest starts to shift. Up to this point, much of the attention in the market has been on getting this year’s corn and soybean crops planted. Now that this has been completed, market interest shifts more toward crop growth and condition. For the past several growing seasons, we have seen crop stress from drought. At the current time there is very little drought in the Corn Belt from widespread spring rains. As a result, we are seeing less weather premium in futures’ values. This is especially the case with yields being very respectable in recent years, even with weather stress.

One topic that is getting more market attention is what soil conditions this year’s crops were planted in, mainly corn. Some regions of the United States suffered from abnormally wet fields this planting season and planting was maybe done in less than ideal soil conditions. We are also already hearing concerns that wet soil will prevent corn plants from establishing solid root systems. While these factors do bear monitoring, they are not bullish enough to spark a market rally at this time.

We are also approaching a seasonal shift that tends to support U.S. soybean exports. The soybean harvest in Brazil is mostly complete for the year, and now the safrinha corn harvest is starting. Export demand for the 2nd corn crop is strong given the wide price spread between that corn and other global suppliers, including the U.S.

Brazil exporters focus on one crop at a time, so once exports of safrinha start, exports of soybeans tend to decline. This could easily open a door for U.S. shipments to buyers who do not have enough storage to make it until Brazil resumes soybean exports. The question is how many importers may need this coverage, mainly China. If we do not see demand pick up trade may start to alter its soybean balance sheets.

The United States has seen its share of the Chinese soybean market recede in recent years and now the same is starting to be seen in corn. The United States was traditionally the leading supplier of both corn and soybeans to China but the expansion we have seen to Brazil’s soybean production has cut this market share. The current market share on soybeans is roughly 75 percent of needs coming from Brazil and the remainder from the United States.

Brazil has also started to export more corn to China, and now China has approved Argentine corn for import. Given China’s corn import forecast of just 20 million metric tons this year, there is not a lot of room for sizable U.S. trade.

China’s commodity demand on a whole is starting to change. For one, China is starting to expand its domestic production through the use of modern technology, including genetically modified crops. At the same time, China is consuming less grain for feed as animal numbers are trimmed. This is mainly from the hog industry where overproduction was a major issue. This loss of demand has driven China’s domestic corn values to three-year lows and slowed their buying demand.

Another factor in China’s commodity demand is population changes. China has long been the most populated country in the world. This has changed in recent years though, and now India is the world’s highest populated country. This change has lessened China’s food demand on a whole from past years. China’s population is also aging, and demand will likely continue to decline.

We are now starting to see more market attention on what we will see for acreage revisions in the June 28th report from the USDA. In March, the USDA projected planted acreage of 90 million on corn, 86.5 million on soybeans, and 47.5 million for wheat for this year’s crops. While the wheat number seems solid, the corn and soybean figures are likely to change.

Even with corn planting near the average pace, to see unplanted acres is not surprising. The question as always is how many acres may transition away from corn to alternative crops such as soybeans. Several analysts feel the USDA may have underestimated corn acres in the March intentions and any loss of acreage makes the 90-million-acre projection more likely. The same thoughts make the soybean acreage estimate more believable.

At this stage we may need to see a shift of 2 million acres from corn to soybeans to be a significant factor in price discovery.

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