Harvest is already starting to wind down across the Corn Belt for another year. As it does, attention shifts more toward corn and soybean demand than supply.

While several producers claim they will hold as much grain as possible in hopes of a rally, many already have grain forward-contracted that will help fill the nation’s supply line. Not only can this affect the futures market, but basis as well.

Seasonal weakness in the U.S. cash grain market this harvest season has been limited. Producer and commercial terminals were mostly empty going into the harvest season, and have the ability to hold a large amount of this fall’s harvest.

As a result, internal processors are already becoming concerned with the possibility of supply shortages once harvest concludes. This is even more of an issue in areas that were affected by low yields and acreage losses.

Trade continues debating whether the current stocks to use ratio on corn is bullish, bearish or neutral. At present, the projected ending stocks on corn of 866 million bushels are a 6.8:1 stocks-to-use ratio. This is nearly equal to last year, when corn was trading roughly 70 cents a bushel under today’s value. At the time, the market was just beginning to ration demand, however, and currently, the United States is seeing corn demand decline at a rapid pace.

There are several factors that have changed the outlook on corn between this year and last. One of the most dominant is Chinese corn production, as that country is expecting to produce 9 million metric tons more corn this year than last year.

This increase in output may be just enough to prevent sizable corn imports for at least one more year. We are also seeing a large amount of wheat usage in the feed market, which is displacing corn.

Even if China does increase corn imports and the majority comes from the U.S., it may still not impact the market a significant amount. If U.S. corn yields and demand remain relatively the same for the rest of the marketing year, the U.S. could have close to 900 million bushels of carryout.

Even if China doubles its corn imports, that would still leave the U.S. corn carryout at 800 million bushels. This is not enough to cause speculative buying in today’s market.

Laws in Brazil that limit foreign ownership of farm ground have long been criticized, and are again coming under fire for another reason. Borrowers are no longer able to use land as collateral for loans because of this law, mainly because of the fact if the loans are defaulted, lenders cannot take possession of the land.

In turn, this means many producers may not be able to secure needed financing for grain production. Not only could this hurt current production, it may limit any expansion, as well.

There are other concerns regarding land ownership, not just in South America but around the world. These are from members of the United Nations who feel the recent push to buy land as an investment is going to hurt the world food supply. Investors have shown more interest in land recently as an alternative to the volatility in the financial market.

Investors claim this land buying is actually good, as it will bring more land into production.

More emphasis is being placed on drainage control rather than the standard whole-farm drainage producers have been using for several years. Many farmers in the Midwest are now putting control systems and valves on field tiles than can be closed when water loss is a concern.

Farmers who have been using these methods say it made a tremendous yield difference this year, as soils did not dry out when the drought began. Environmentalists also support this method of farm drainage, as they believe it reduces soil erosion.

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 believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.