There is plenty of talk in the market over the corn planting taking place in the Southern Corn Belt. While this is far from the main start of the planting season, we know it won’t be long and planters will be rolling in full force.

This early planting means harvest will likely be early, as well. A result of this will be the ability to pick up the inverse in the market between old and new crop. In many cases this will add $1.50 of revenue to a bushel of corn.

This inverse in the corn market is having an impact on grain buying too. Corn buyers are looking at the inverse in the opposite way of a seller, and know if they hold off bookings until new crop, they can save a considerable amount of money on needs.

As a result, many corn buyers are using cheaper alternative grains when possible, especially in the feed market. This inverse is affecting the soybean market as well, but not nearly as much.

One heavily debated topic in the market that could have a significant impact on final carryout both this year and next is Chinese demand. Chinese officials claim they will need to import little if any corn in the next year because of record yields.

At the same time, we are hearing reports of Chinese buyers showing interest in all commodities, including corn, soybeans and pork. The bookings are needed to build government storage following the recent drawdown seen as reserves were used to satisfy demand.

Feed grain demand is giving the market mixed signals. The USDA is projecting corn use for feed at 4.6 billion bushels this year, which would a second quarter usage total 5.2 percent under the past two years. In the first quarter of the marketing year, however, corn use for feed was up 10.7 percent.

At the same time, total feed demand is down from initial estimates, which is giving the feed grain market a negative feel.

Trade seems to be underestimating the possibility of a soybean shortage in the United States this year. March 1 soybean inventory is expected to be down 8 million metric tons in South America, from a year ago. Given current soybean usage, this could drop soybean stocks to use by the end of the marketing year to its tightest ratio ever. This is possible even if the United States produces a trendline soybean crop.

While many have enjoyed the mild winter the United States experienced this year, it may cause problems later on. Agronomists are warning the mild conditions and lack of a significant cold spell could cause insect issues.

Even in most mild winters temperatures drop to a level that greatly reduce insect populations. This could become an issue that would not only affect next year’s yields, but profitability as well.

The United States is starting to run into issues with dried distillers grains (DDGs) it is offering the world market. Some ethanol plants have started to extract the oil out of their DDGs, and either using it as a fuel or selling it in the open market.

Extracting this oil makes the DDGs a higher-protein feed ingredient. While this seems positive, many Asian countries would rather have DDGs with a higher oil content, than protein.

We are now at a point of the marketing year when cash grain movement grinds to a halt. This is because farmer attention shifts to planting rather than grain marketing, and will remain there for the next several weeks. As a result, we are approaching what is historically one of the year’s best basis level windows.

We will still see commercial grain movement, though, which will keep basis improvements in check.

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.