While weather conditions remain mostly favorable across much of the United States for crop development, some forecasters believe things could rapidly change. Soil moisture across the country is currently reported at 78 percent adequate, a build from recent weeks.

There are some concerns that we will see a shift in weather patterns as the growing season progresses, though, and could possibly see a drought later in the year. This is possible, but as with all weather events, the timing of any dry conditions will determine its impact on yield and values.

Not only is weather currently non-threatening in the United States, but in South America as well. This has been a great benefit to late developing crops in those countries, as well as aided any fields that were double-cropped.

The most talked about of these has been in Brazil, where the second corn crop is forecast to be a record. If these conditions persist we will likely see increased crop sizes in future balance sheets updates.

Even though we have not seen much support from the data, there are firms that expect to see a decrease in global grain supplies this marketing year. For corn, stocks are expected to drop a large 18 million metric tons (mmts) because of smaller production in countries such as the United States and Ukraine.

Wheat stocks are also forecast to decrease by a moderate 6 mmts. A portion of this support is being offset by reports out of South America of better-than-expected yields.

By all accounts the grains and soybeans remain a buyer’s market. This is a term used to describe a market where there is plenty of supply and buyers tend to determine the price direction, not sellers.

One thing different between this year and other buyers’ markets is that basis remains firm, even with near-record inventory. This is because a large amount of stocks are still in farmers’ hands and they have little interest in movement at this time.

Buyers in the cash market know they are nearing a pivotal time for a farmer. Before long growers across the United States will be faced with the decision on what to do with their remaining old-crop inventory, either move it in the near future or hold it into the next year.

One of the greatest factors in this decision can be crop conditions and how yield may be impacted. The better a crop looks, the more likely a farmer is to liquidate his old-crop inventory.

Not only are farmers across the United States holding a large volume of old-crop corn, but new-crop sales are minimal. In fact, new-crop sales are near record-low totals across much of the Corn Belt.

It is not uncommon to see farmers be reluctant sellers in some years as they want to see how well the crop is progressing before making marketing decisions. It would not be surprising to see elevated sales in the near future if crop conditions remain favorable.

While U.S. growers are holding corn, in South America we are seeing farmers hold soybeans off the market. This is being done more to see what changes take place in government policy between now and the end of the year.

There is speculation changes will take place to the export tax that will generate more income for South American farmers, mainly those in Argentina. As a result, some analysts predict South American soybean reserves will be 16 mmts greater than a year ago, by September.

Trade will start focusing more on preparing for the June release of quarterly stocks and plantings reports.

Not only will this update us on inventories, but give a better idea of actual planted acres.

It would not be surprising to see an elevated number of corn acres and a slight decrease in soybean plantings in this release. Until those reports are published, much of what we see in daily market activity will hinge on weather and crop reports.

Agricultural economists believe the recent bird flu outbreak could cost the states of Iowa and Minnesota upwards of $1 billion in lost revenue.

These two states have seen the greatest number of cases so far, with bird losses of 20 million in Iowa and 8 million in Minnesota.

These losses would not be just from actual birds, but also from other economic factors including the possible loss of jobs.

There are also concerns the United States on a whole will see loss of income from reduced poultry exports.

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.