More market attention is being placed on spring weather outlooks as we approach the upcoming planting season. We are already starting to see a division take place in the Corn Belt when it comes to weather conditions. The West remains dry while rains continue to move through the East.

While it is too early for this to be much of a factor in price discovery, trade is becoming more concerned with global balance sheets, and any adverse conditions will start to have more of an impact on futures.

We are seeing more debate over what numbers could be released in the March 29 Prospective Plantings report at the end of the month. An acreage division of 90 million on both corn and soybeans was released in the Outlook Forum, and the intentions are not expected to be far off of these. Even if we see a slight deviation, it would be unlikely to impact balance sheets a significant amount.

The real interest for the market right now is what will be released in the initial new-crop balance sheets in May. For the past four years the USDA has used the Ag Outlook Forum corn yield in its initial production estimate, which would be 174 bushels per acre. The soybean yield estimate has been used for 11 straight years and would be 48.5 bushels.

It is believed these yields would ultimately leave the United States with new-crop ending stocks of 2.27 billion bushels on corn and 460 million on soybeans.

It has been well-publicized that Argentina will have a smaller soybean crop this year than last – the only real question is how much smaller. There are some estimates that Argentina will harvest a 600 million-bushel smaller crop than a year ago.

Others are not as negative and believe the crop may only be down 400 million bushels. While this is a reduction, it can more easily be offset with higher Brazilian production and the large old-crop reserves Argentina is sitting on.

Some reports have Argentine soybean reserves nearly 300 million bushels greater than usual. Given these ample reserves, the Argentine crop will likely have to fall below 45 million metric tons to cut the global soybean supply.

The market is also paying close attention to U.S. soybean balance sheets. Yearly soybean export forecasts have steadily declined this marketing year, and we will likely see more reductions take place.

While soybean sales have been rising in recent weeks, actual shipments are down and not gaining. At this time it appears as though this will leave the United States with a soybean carryout that is 250 million bushels greater than current estimates.

We are seeing more questions surrounding U.S. corn demand projections, as well. The most talked about is corn sales versus loadings, that indicate an overestimation of demand of 200 million bushels.

We are now starting to see doubt cast over ethanol demand. This is not so much from the actual ethanol demand on corn, but from the fact the resulting distillers grains do not seem to be accounted for.

There are thoughts that any shortfall in the Argentine soybean crop will benefit the U.S. crush industry. While this is possible, any increase in soybean crushing will be limited, as the United States only has a reported 250 million bushels of idle crush capacity that it can use.

By comparison, China has 50 percent of its capacity it can use of needed. There is also an abundance of distillers grains that can be used as a feed ingredient if needed.

The vast majority of market interest when it comes to global weather and crop loss right now has been on Argentine soybeans, but just as much should be on the country’s corn crop. In the majority of years that Argentina has a drought, the loss of production in corn is actually greater than in soybeans.

In years similar to this one, corn yield loss has ranged from 6-21 percent, according to FCStone. This is critical to a country that exports nearly two-thirds of its corn production.

Heavy soybean selling has taken place across the United States in recent weeks. It is now believed that U.S. farmers have marketed between 75-80 percent of their old-crop soybeans. By comparison, Argentine farmers have only marketed 10 percent of their soybean crop.

Some analysts are suggesting this is from a poor crop, but that is not likely the real reason. Argentine farmers are waiting to take advantage of market carry and tax incentives that are adding nearly 25 cents per bushel to soybean sales. This could greatly distort the volume of soybeans the country has to market this year.

Trade is receiving mixed signals in regards to Chinese soybean demand. China continues to import a record volume of soybeans and remains the largest destination for U.S. sales.

At the same time, the United States continues to see its share of total Chinese soybean sales shrink. A year ago China accounted for 72 percent of U.S. soybean exports, but this year it is just 66 percent of sales. Given the fact Brazil is growing another record soybean crop, this percentage will likely continue to shrink.

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.