Even though we have seen soybean demand increase in recent weeks, trade remains concerned with cumulative bookings. The United States is on track to export 850 million bushels of soybeans in the first quarter of the marketing year.

This is down from the 926 million that were exported in the same quarter last year. What is concerning is that first-quarter usage tends to be the highest of the marketing year.

There are concerns in the market over the quality of U.S. soybeans this year, which is affecting demand for that commodity. One area this is being noticed is in the Eastern Corn Belt, where protein content is lower this year than average.

In turn, this has lowered the protein content of the resulting soy meal. This means buyers will need to book higher amounts of U.S. meal than they would from other sources to reach the same quality of feed.

Another area of concern is the quality of soybeans sitting in the Delta region. This is an ongoing result of the early harvest that took place to avoid yield loss from hurricanes. Buyers are using this as a negotiating factor when making import purchases, and is a factor we will contend with all marketing year.

The United States is seeing pressure in the world market from South America, from two different fronts. For one, the U.S. needs to remain competitive on asking prices, which in recent weeks have trailed Brazil and Argentina by as much as 30 cents per bushel.

Currency values are also a factor in pricing, which has also favored South America. These factors have made it difficult for soybeans to rally and still maintain a market share.

The changes that were recently announced to Argentine export taxes on soybeans are expected to cause elevated sales out of the country. While this is likely in the long term, it could actually cause just the opposite to take place until then. Soybean farmers and exporters are likely going to hold as much inventory as possible until taxes recede.

This could actually reduce sales and open the door for more U.S. export business in the immediate future.

The United States has seen elevated corn demand from Mexico this marketing year, but we are not the only source to see this. Mexico has also been buying corn from Brazil. In fact, recent corn trade between the two countries has been in record volumes.

Price and quality are two reasons for this elevated buying from Brazil, but so is the fact the country has a large volume of corn to export.

This corn trade is causing confusion in the corn complex. It is believed that Brazil will harvest less corn this year, as plantings are expected to be down. As a result, many analysts had thought Brazil would limit corn exports to try to maintain its reserves. This willingness to sell corn has many thinking its corn production may not be as small as once predicted.

Another global region that is being closely monitored for corn production is the Black Sea. Its production is expected to be down this year, with Ukraine seeing a 20 percent smaller crop and Russia expecting output to be down 15 percent. If correct, this would put production in the two countries just under USDA expectations.

One more country getting attention is China, for corn production. Analysts in China are reporting a crop of 212 million metric tons is being harvested. This is down 3.4 percent from the 2016 crop, and the least amount produced since 2012. This smaller crop should allow China to continue rotating and reducing government reserves.

Mixed reports are coming out on Brazilian soybean planting. While the country’s planting rate is close to average, a closer look shows this is slightly distorted. Parts of Brazil have seen rapid planting this year, while others are well behind average.

The concern with this is that we are approaching the point on the calendar where the optimum planting window comes to a close, which could affect not just yields but acreage, as well.

Not only have we seen an increase in acreage in Brazil in recent years, but yield per acre is growing. In the past two years Brazil’s soybean yield has increased 3 bushels per acre to a 45.7-bushel average for the country.

An even greater yield increase has taken place in corn, with the average jumping 20 bushels per acre over the same time. Brazil’s national corn yield is still just 86.2, which leaves plenty of upside potential.

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.