We are starting to see more interest in what the United States may see for yields this coming year. In the USDA Outlook Forum, a corn yield of 174 bushels per acre was predicted, a large 3.3-bushel increase from last year.

While this size of an increase is higher than most we have seen, there has been a trend of elevated corn yields since 2013. This yield estimate is also under our final yields in the two most recent crop years.

Trade is also questioning the soybean yield that has been estimated. The initial soybean yield estimate is for 48.5 bushels per acre, which is actually just under what some analysts had expected. Near-perfect growing conditions to finish out the production season are the primary reason we have had better-than-expected yields on soybeans.

We need to remember that the final soybean yield has topped the initial estimate in each of the past four years.

A greater debate is what we could see for planted acres in the United States this year. This is coming in part from uncertainty in the sorghum market. Given recent trade concerns with China and questionable demand, there are thoughts we could see 500,000 acres shift away from sorghum production. While not a huge amount, these will add to already large production forecasts.

As we approach the spring planting season we are seeing more attention placed on the corn/soybean price spread. This has narrowed considerably in recent weeks and now favors soybeans less than it did.

At first glance, it is thought this would increase corn acres, but that is debatable. This is because the projected return on both corn and soybeans has risen. The only acres this may affect are those without inputs already applied or booked – and that may be a relatively small number.

The United States is at a point where it is seeing more growth in ethanol demand for export than domestic usage. In the past five years domestic ethanol usage has increased 6 percent. At the same time, U.S. ethanol exports have grown by 122 percent and now account for 7 percent of all ethanol demand.

If not for these exports, the ethanol industry would be facing even more financial stress than it currently is.

We are already seeing some mixed opinions on both old- and new-crop soybean balance sheets. A few analysts believe old-crop carryout will grow and eventually reach nearly 600 million bushels. These same individuals believe new-crop soybean reserves will tighten to 400 million, given the projected short crop in Argentina.

While this is possible, there are many factors that will ultimately determine both of these figures as the marketing year progresses, especially new-crop.

The current fund position in corn is raising some interest in the market. Beginning at the end December, funds started to build a long corn position, which caused the buying of just over 400,000 corn contracts and a rally in the complex of 42 cents, according to research from FCStone.

In the past two weeks funds have liquidated roughly 50,000 of these long contracts, but the market has receded 20 cents. Given the funds are still long an estimated 190,000 contracts of corn, this shows just how much pressure we could actually see in the complex.

Chinese officials have increased their soybean import forecast for the 2018/19 marketing year. It is now believed the country will import 100 million metric tons (mmts) of soybeans this year, up from last year’s 97 mmts. This total is considerably larger than the 93.5 mmts that were imported in the 2016/17 marketing year.

The same officials believe China’s domestic soybean production will remain unchanged this year at 58.5 mmts.

While this would appear to be good news for the U.S. export market, that may not be the case. Brazilian officials have increased their soybean production estimate, and in turn, their export volume as well.

It is now believed Brazil will export 75 mmts of soybeans this year, up from the previous estimate of 71 mmts and well above last year’s 68 mmts. Not only could these soybeans satisfy the increase in China’s soybean needs, but they could cover losses in the Argentine crop as well.

Its appears as though the La Nina weather system is not going to fade as much as earlier thought. Initial forecasts indicated this system would fade out and be gone by spring. Recent models shows the system is lingering and will remain a weather factor for the next few weeks.

Historically, a La Nina has brought dry conditions to the southern United States, wet weather to the Eastern Corn Belt and normal conditions to the Western Belt.

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.