Corn acres in the March planting intentions report were estimated at 95.86 million, compared to the 91.92 million planted in 2011. Soybean acres are forecast to total 73.9 million, down from last year’s 74.98 million. Total wheat acres are expected to reach 55.9 million, with last year’s being 54.4 million.

The quarterly stocks report was also released, and showed adequate stocks of all commodities. Corn stocks on March first totaled 6 billion bushels, compared to 6.52 billion bushels a year ago. Soybean stocks increased 120 million bushels from a year ago, to total 1.37 billion. Wheat reserves on March 1 totaled 1.2 billion bushels, compared to 1.43 billion in 2011.

Private analysts continue to reduce their South American yield estimates, with most reductions now taking place in Brazil. Analysts in Brazil claim the country’s corn crop will be 4 million tons fewer than the latest USDA projection because of dryness that will impact the second planting of that grain.

Reductions to Brazil’s soybean crop are much less, with production only 1.5 million tons less than the USDA predicts. If these reductions are confirmed in futures supply and demand numbers, they will greatly affect world balance sheets, especially on soybeans.

Chinese officials have announced they will likely increase their corn imports this marketing year. Right now China is projecting corn imports of 4 million metric tons this year, almost three times what they were last year. Several analysts feel this will be a great benefit to the U.S. corn export program.

While the United States may get some of this business, the recent trade pact agreement between China and Argentina may limit how much corn the United States is able to provide.

Some economists believe the current corn-to-ethanol conversion rate is not correct. For several years the rate has been 2.7 gallons of ethanol from 1 bushel of corn. It is now believed that better corn genetics and updated ethanol processing can extract 2.9 gallons of ethanol from 1 bushel of corn. While this seems minimal, it cuts corn demand from the industry by 300 million bushels.

We are already starting to see predictions on U.S. yields, with some surprising numbers. Corn is the one that has most traders talking, following a prediction of a 168 bushels-per-acre average yield.

This prediction is being based on the shifting from a La Nina to an El Nino weather pattern. If this type of a corn yield is achieved, and U.S. corn acres do total 95 million, Chinese imports could easily be absorbed with little impact on ending stocks.

There are thoughts that an early corn-planting season will lead to elevated yields, but this may not be the case. There is no real historical correlation between early corn planting and elevated corn yields. In the past 25 years there were seven with exceptional corn planting rates, and only two resulted in above-trend yields. These were the years of 1994 and 2004.

Trade is also starting to make comparisons between this year and the one of 2006 as we approach the spring planting season. That year, the United States only had 400,000 unplanted corn acres given the near-perfect planting season. If similar plantings take place this year, the U.S. could easily produce enough corn to satisfy projected demand, even with a slightly below-trend yield.

Unplanted soybean acres in 2006 only totaled 250,000.

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.