The U.S. government has released its baseline estimates, which are the first actual look at new crop production for the United States. Corn yield for this year is projected at 163.5 bushels per acre, to give us a 14.44 billion-bushel crop.

Corn demand is pegged at 13 billion bushels, and when this year’s carryout is added in, it will leave us new-crop ending stocks of 2 billion bushels. Economists believe this level of corn inventory will equate to average futures of $5.40.

Data were also released on soybeans. Soybean yield is forecast to average 44.4 bushels. This is forecast to give us a soybean crop of 3.33 billion bushels and if projected usage is unchanged from now, carryout would remain a minimal 185 million bushels on soybeans. This should help support soybean futures around the $11.35 mark for the calendar year.

The USDA also projected farm income for 2013 at $128.2 billion in its baseline data. This is a 13.6 percent increase from 2012, and would be a yearly record. The 2012 farm income is now reported at $112.8 billion.

The USDA expects commodity values to recede slightly on the year, but figures this will be more than made up for with increased yields.

As we approach the spring planting season, more interest is being placed on potential acreage. Private analysts are predicting corn acres of close to 100 million, which is keeping pressure on new-crop corn bids. The immediate reaction in the market is that soybeans will need to rally to prevent this shift from happening, but that may not be the case.

A large amount of cotton acres are forecast to shift to corn and, when combined with the release of acres from the Conservation Reserve Program, soybeans may not need to push bids to ensure plantings at all.

We are also seeing more attention on long-range weather outlooks as spring approaches. The United States continues to suffer from drought conditions with spring planting just a few weeks away from starting. The worst drought conditions remain in the Western Corn Belt, where the majority of the country’s crops are grown.

We have seen slight improvement in the Eastern Corn Belt in recent weeks, but soil moisture is still not abundant. These improved rains in the Eastern Corn Belt have done more than just benefit dry soils. The increased moisture has made its way into river systems, and alleviated concerns over shipping issues.

As a result, we have seen increased grain flow into river terminals and building inventory at gulf terminals. At the same time, interest has declined on U.S. exports and weighed on Gulf basis values.

Soybean futures continue to be supported by strong demand, on old and new crop. China remains the largest buyer, with 1.5 million metric tons of U.S. soybeans already on the books for delivery during the 2013-14 marketing year. This compares to bookings of just 120,000 metric tons a year ago at this time.

Before long, however, the United States could become a secondary supplier of soybeans to the world market. South America’s soybean crop is expected to be 180 percent of what the U.S. crop was last year, making it the predominant soybean source for the world market.

This means eventually the United States will only need to raise enough soybeans for domestic use, and to fill the gap between South America’s harvest seasons. This is one of the primary reasons we are not seeing more pushing in the soy complex to sway acres away from corn production.

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.

This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.