By KARL SETZER 
Market Analysis

Debate is taking place on U.S. acres, not just how many are going to be planted to what crop, but how many the United States has on a whole. Over the past few years total planted acres in the United States have shrunk from 4 million-7 million per year.

The obvious question is where these acres are going. While some have likely shifted into other crop production, it seems unlikely all have been lost.

While much of the focus in South America has been on Brazil’s production, the situation developing in Argentina is getting more interesting. It is not out of the question Argentina’s soybean stocks could increase substantially this year, and possibly double.

This is not necessarily from yields, but from the fact farmers in Argentina are holding soybeans, as that commodity has more value than the country’s currency.

Questions continue to be asked surrounding demand for U.S. soybeans for the remainder of the marketing year. We continue to see strong demand for soybeans in the export market, and many analysts believe this will lower our carryout.

While this is possible, crush is actually running behind expectations, given the data we have been presented. Even if we do see an increase to soybean use, it may have to be sizable to reduce carryout to a level that will cause market concern.

We are starting to see risk premium added in to the futures market, helping put a floor under values. It will still be some time before we see enough premium added to be noticed, however.

This will come much closer to the actual spring planting season, and given current grain and soybean reserves, any weather threat may have to be verified to propel futures higher.

One of the greatest struggles the market is facing right now is finding fair market values for both corn and soybeans. At present the USDA is predicting new-crop cash averages of $3.50 on corn and $9 on soybeans. Unless we see a weather story develop in the market this growing season, these projected cash values will quickly become a reality.

What is concerning with these estimates is that we are at or above those values now, and many farmers across the United States are still worried about profitability.

Now that we are in the month of March, the futures market tends to have more fundamental information to use in price discovery. One factor that will have more influence on trade is weather and growing season outlooks.

We will also see trade start to make preparations for the March planting intentions and quarterly stocks reports. The cash market can also see an increase in volatility in March, as country movement tends to increase ahead of the spring planting season.

While March typically does see an increase in country movement, this year may be different. Farmers across the United States have been reluctant sellers this marketing year, as markets have been perpetually depressed and cash flow from last year remains adequate. For the past several weeks the majority of what has been delivered has either been forward-contracted or from commercials.

Producer holding of inventory unnecessarily at this time of the marketing season can be a costly mistake. We are now at a point when temperatures tend to increase, and can cause condensation in stored inventory.

What is more concerning this year is that just like last year, stored inventory appears to have taken on moisture over the winter months even if it was dried last fall. Not only could this generate quality discounts across the Corn Belt, but possibly reduce potential delivery options.

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.