By KARL SETZER
Market Analysis 

Many analysts are starting to look forward to USDA reports that will be released in March, mainly the quarterly stocks and planting intentions. For corn the most watched number in this may be feed demand.

It appears as though feed demand has been overestimated this year, and will impact ending stocks. It is not impossible to imagine that any decrease in feed use of corn alone could give us a 2 billion-bushel carryout.

For soybeans, we are seeing nearly all attention being placed on Chinese demand estimates. The recent baseline data indicate Chinese soybean demand will increase by 34 million metric tons over the next 10 years. While this seems positive, it is also believed that South America will supply most if not all of these soybeans to China.

There is also talk in the market that new-crop soybean acres will be no greater than 84 million – which will be a main focal point in the March planting intentions.

Global currency values continue to impact today’s commodity market. This is especially the case in countries where currency values have eroded at the same time the dollar has strengthened, mainly in Brazil.

Since the global grain trade is based off the U.S. dollar, this has encouraged sales of Brazilian soybeans. Even with lower futures, many farmers in Brazil are now actually receiving more for soybeans than they have for the past several months.

Not only are U.S. soybeans finding competition in the global market, but so is corn. In the past week the United States has seen buyers pass on offerings in favor of cheaper sources, mainly from the Black Sea.

What is concerning about this is the corn is being booked for late summer, when analysts had hoped demand for U.S. corn would be strong. Corn is also finding pressure from alternative grains, primarily sorghum into China.

Concerns over export sales cancellations taking place are starting to fade. This is from the fact actual loadings are ahead of the normal volume for this time of year. Thirty-six percent of the year’s total projected corn loadings have been shipped, compared to 32 percent a year ago. Soybean loadings are even higher, with 78 percent of the projected total being loaded out, 5 percent more than last year.

A recent projection by the USDA indicates farm income will decline by 32 percent this year. While we may in fact see this decrease take place, it is questionable as to how much of an impact it will have on actual revenue. This is from economists also expecting to see a decrease in farming costs of operation, especially for land.

We have started to hear reports indicating land values across the United States have declined in value on a whole. This is in direct response to a much softer commodity market than we have had for the past few years, and a more cautious approach to spending.

This has also started to be noticed in the cash rent market. In the past few weeks more cases of cash rents being negotiated down have surfaced across the United Sates.

Farmers remain hesitant to market their remaining old-crop inventory, as they are hoping for higher values. While this may happen, how much of a rally we would see from this point forward in the marketing year on old-crop is questionable.

At the current time, market values are indicative of the stocks-to-use ratio being projected by the USDA, especially on corn. In fact, some economists believe old-crop demand is being overstated at present and values have more downside risk than upside.

This same situation is not true for new-crop corn. Trade continues to debate new-crop acres, and once again is pointing toward the fact corn could lose acres to soybeans.

Even a steady yield but a loss of 3 million-4 million planted acres could make a considerable reduction to U.S. corn stocks.

There is also only a minimal amount of risk premium in the new-crop futures on a whole, which may make them hypersensitive to adverse weather forecasts and market developments.

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.