The United States may see increased global pressure on soybean values in the very near future. In as little as 45 days we could see new-crop South American soybeans enter the world market.

This is one of the narrowest windows for U.S. soybean exports trade has ever seen. As South America’s soybean production expands, this window of opportunity for the United States will narrow even further, meaning prices will have to be very competitive to generate any sales interest at all.

The rapid soybean planting and maturity in Brazil is starting to gain market attention for other reasons. Many seed suppliers in Brazil claim they are already running low on corn seed and some are totally sold out. This is from farmers who believe their soybean crop will be ready for harvest earlier than normal, which will give them more time for double-cropping with corn.

The current corn/soybean price ratio favors the planting of corn this coming production season. As a result, soybean futures have rallied in an effort to secure more new-crop acres.

The downside of this action is that U.S. soybeans are now overpriced in the world market, and old-crop sales have suffered. A different way of looking at this situation is that U.S. corn may be overvalued and needs to depreciate.

The United Sates may see more of a shift in next year’s acres than currently expected. While there is talk of cotton and wheat acres shifting into corn in the Delta region, there is also talk of corn acres in the Deep South shifting into hay production.

This is in reaction to the drought that has impacted this region for the past several months, and how hay is more drought-resilient than corn, especially in Texas. It is not out of the question that once all of these acres are finally shifted around, they will still be equal to most estimates.

Trade is also becoming increasingly concerned with the drought building in the upper Midwest. Unless these dry soils are relieved soon, it could start to impact next year’s crop production.

Now is the time when many farmers in this region begin planning their next crop rotation, and if soils will be exceptionally dry, we may see a shift to a more drought-tolerant crop, such as soybeans. Some producers claim they will over-book their seed needs and determine actual acres next spring, as a result of current weather.

Another weather story that affects trade at this time of year is the approaching winter and seasonal closing of the Upper Mississippi River. The closing of terminals in the North begins now so no barges are caught over winter.

As a result, we normally see river terminals empty their facilities, which helps to replenish gulf inventories. Basis tends to widen once these river terminals close, as it means more grain needs to be moved by rail or truck – a shift that elevates transit costs.

The market was caught by surprise when China released its latest Purchasing Manager’s Index, or PMI, data. This index is a measure of the country’s manufacturing output, and for the first time in 32 months, it showed a contraction in production.

Reduced manufacturing is being credited to the global economy and how countries are not showing demand for Chinese goods. The concern is that this contraction will impact China’s economy as well, and reduce global commodity demand.

Lenders are becoming concerned with the amount of risk in the commodity market. These lenders do not believe borrowers are prepared for a correction to today’s market, and feel one could devastate some operations. Corrections in today’s market are more severe than in recent years, with price swings 40 percent greater than they were just four years ago.

As a result, lenders are strongly encouraging borrowers to have a risk management plan in place.

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.