By KARL SETZER
Market Analysis 

Long-range balance sheets and price projections have been released, and not much improvement is expected in the corn complex. Through the year 2020 the stocks-to-use on corn is not forecast to drop below 10 percent.

Historically, this is associated with corn values not much better than what we have now. Over this period, cash corn values are expected to range from $3.50-$4.15 per bushel.

The same predictions were made on soybeans. The lowest stocks-to-use on soybeans over the next five years is at 8.7 percent. According to historical tendencies, this will put cash soybean values from $8.90-$10 per bushel.

One difference in soybean price estimates is that global production is forecast to keep growing, which could be even more negative for domestic values. The official baseline estimates from the USDA will be released in February 2015.

We continue to see a division in the commodity market between old- and new-crop values. Old-crop soybeans are being supported by tight inventory, while new-crop are being stressed by thoughts of increased production and stocks.

The opposite is true on corn, where old-crop supply is near burdensome, but new-crop is holding firm from thoughts we could lose acres to soybeans given today’s economics. This is likely a situation we will see well into the later parts of the marketing year.

There remains talk in the market over the possibility of acres shifting from corn to soybeans this coming year. At present most economists believe upwards of 3.5 million acres will change from corn to soybean production. If this happens we will need to see an average corn yield of no fewer than 170 bushels per acre to prevent reserves from being sharply reduced. At the present time this is one of the greatest sources of support for corn values.

The possibility of soybean values declining has prevented a substantial corn rally from this factor. Once we get past the immediate need to cover soybean demand, the United States and global market will both have an ample supply of soybeans.

Some economists believe this will cause deferred soybean values to decline by at least $2 per bushel. This is greater than the $1.50 per-bushel decline that would be needed to offset a rally in corn to secure acres.

The real question in this debate may be how long current soybean demand will last. The United States has already loaded out 610 million bushels of soybeans, or 36 percent of the total forecast for the year.

While this seems bullish and that total demand is likely underestimated, the possibility that sales are heavily front-loaded is something that also needs to be considered. The fact the United States also has a huge carryout forecast is limiting market reaction to the elevated loadings, as well.

Soybean processors are becoming concerned with the slowing of deliveries and the historical tendency for them to remain slow for the next several weeks. According to data from F.C. Stone, 22 percent of the U.S. soybean crop is moved into the supply line in October. This drops to 10 percent in November and then just 9 percent in December.

Deliveries then rebound to 15 percent of the crop in January. Given tight soybean inventories and solid demand, this should help support soybean basis for the next several weeks, if not months.

Analysts are already starting to look forward to the January supply and demand report, primarily for soybeans. In each of the past three years the USDA has increased soybean yield from the November to January production reports.

The greatest increase was a year ago, at 235 million bushels. While this is again possible, what we see for an increase in demand could easily negate a large portion of this production.

There are also expectations to see increased corn carryout in the January balance sheets. Several analytical firms have started reducing their corn export forecasts. These firms now believe U.S. corn exports will total just 1.5 billion bushels this year because of the slow start to bookings and the high price for U.S. corn compared to other suppliers.

In turn, this will likely raise corn carryout, and possibly put it close to 2.5 billion bushels.

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.