More opinions are being voiced over future U.S. exports of corn and soybeans. Trade fully believes soybeans loadings are front-loaded, as buyers are concerned with a lack of available stocks later in the marketing year.

The opposite is true on corn, where declining corn inventories in competing countries is forcing importers to come to the United States for needs. Diminishing feed wheat supplies are also expected to force more buyers toward corn as the marketing year progresses.

We are starting to see a considerable divergence in the corn complex between old- and new-crop fundamentals and, in turn, values. Old-crop corn is finding support from thoughts we will see increased demand later in the marketing year, which will cut into ending stocks.

At the same time, increased plantings and beneficial weather conditions could cause new-crop ending stocks to triple from this year. This split in market opinions could push old-crop corn values toward $8 per bushel, while dropping new-crop corn below $5.

European Union corn demand continues to be overlooked by trade. Europe is exporting wheat to capture its elevated value in the global market, and opting to import corn to fill the void in the feed grain market.

It is believed European nations could import upwards of 12 million metric tons (mmt) of corn because of this situation. This is twice the volume of corn imports the USDA is currently projecting.

While Europe may in fact increase its volume of corn imports, where the grain originates from is questionable. Hopes are the United States will capture the majority of this business, but it will face competition from South America.

Argentina’s corn crop has likely been reduced from adverse weather, but at the same time Brazil’s may be larger than expected.

The International Grains Council has again lowered its projection for world corn and wheat carryout this year. Ending stocks on these two grains are now forecast to total 324 mmt at the end of this marketing year, 4 million fewer than the group’s previous estimate.

This would be the lowest carryout on the two grains since the 2008 marketing year. The most interest is on corn, where ending stocks are forecast to be the lowest in 16 years.

Opinions are mixed on the potential of South American soybean production. Some firms believe Argentina’s crop has been cut 1 mmt due to adverse weather, while others think the crop will be even larger than initially thought, from an increase of acres as corn planting has been delayed.

Even without the possibility of these acres, firms are predicting South American soybean output to rise 29 million metric tons from a year ago. This additional production will be much needed if the United States cuts its soybean inventory as far as predicted.

The USDA is now projecting a 3.3 percent drop in net farm income from a year ago. This is a sharp reversal from the 3.7 percent increase predicted in August. Heavy drought losses, a weaker futures market and elevated feed costs are the leading causes for the change in the economic outlook.

Net farm income is still projected at $114 billion for 2012, however, which is a near-record level.

Trade continues to debate future corn for feed use. A 1.5 percent reduction in animal units is expected to cut feed demand by 9 percent. Feed demand may need to be cut even further if corn reserves are reduced as much as some economists believe they will be.

The decision to keep the U.S. ethanol mandate in place may also require feed use of corn to be dropped from its current estimate.

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.