The USDA left corn carryout unchanged at 632 million bushels in the March supply and demand report. This was actually on the friendly side, as trade had been expecting a 17 million-bushel increase to stocks.

Corn exports were reduced by 75 million bushels, but this was mostly offset with increased feed demand. Ethanol use was left at 4.5 billion bushels. The USDA did decrease the global corn number by 3 million metric tons (mmts), mainly from a slightly smaller Argentine crop.

As with corn, the USDA left the soybean ending stocks estimate unchanged at 125 million bushels. This had a negative reaction in the market, even though soybean carryout was only forecast to decrease a minimal 3 million bushels.

Surprisingly, soybean exports were left unchanged, as the USDA believes sales will slow as the marketing year progresses. Global soybean carryout was left unchanged at 60 mmts. The USDA kept Brazil’s soybean crop at 83.5 mmts, but did cut Argentina’s 1.5 mmts.

The only real change in domestic balance sheets was in wheat, where slow exports caused a 25 million-bushel increase in carryout, to a comfortable 716 million bushels.

The USDA is coming under fire for the yield estimates it released in its February Outlook Forum. The USDA is projecting yields of 163 bushels per acre on corn and 44.4 on soybeans for this coming production season. Many are quick to claim these yields will be hard to achieve, given current drought conditions in the Corn Belt.

While this may be true, and yield reductions may take place, the bottom line is even with reductions from government yield predictions, the United States could still see a rebound in grain reserves.

The U.S. commodity market is currently in a tight spot. Trade is well aware of the fact old-crop carryout is going to be tight on both corn and soybeans. At the same time, just normal new-crop yields will be enough to cause a considerable build in ending stocks.

The hard part for the market now is to ration old-crop inventory while promoting new-crop usage, which can be a difficult task.

Trade is starting to look forward to new crop demand. For corn, the USDA is predicting an increase in usage of 1.7 billion bushels. Trade is projecting an increase in Chinese demand alone of almost 400 million bushels.

The USDA has a strong tendency of overestimating U.S. corn demand in its outlook forum, though, with initial estimates being too high in five of the past seven years.

The real interest on new-crop demand is on soybeans, and again, China will play a key role in this commodity as well. The USDA is forecasting China’s soybean ending stocks at 14 mmts.

China has been known to cut its soybean reserves to as little as 2 mmts to avoid elevated values in the global market, though, which can have a significant impact on U.S. demand.

The spread between corn and wheat futures is becoming more of a market factor. Historically, wheat futures hold a premium to corn values.

Recently we have seen the two grains become nearly equal in the futures market. If this continues, or wheat trades to a discount to corn, we could easily see wheat start to displace corn, especially in the feed market.

CME Group has announced it will be changing hours of business on the Chicago Board of Trade (CBOT) beginning April 8, pending Commodity Futures Trading Commission approval. CBOT will be open from 7 p.m.-7:45 a.m. Central, Sunday through Friday. It will halt trade from 7:45 a.m.-8:30 a.m., and then continue through 1:15 p.m.

Karl Setzer is a commodity trading advisor/market analyst at Maxyield Cooperative. 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.