Trade is becoming more interested in what we are seeing for corn crop ratings, as so far this year, the crop has a high condition number. Trade is quickly reminded that the corn crop rating was high in the initial reports for the past two years as well, but drifted lower from there, and final corn yield ended up being below-trend.

It is uncommon to have three years of below-trend corn yields in the United States, but it is not unheard of.

Private analysts believe old-crop soybean carryout in the United States will be lower than what the USDA predicts. The USDA is currently forecasting old-crop carryout at 210 million bushels. Some analysts believe this could be as much as 100 million bushels fewer, given the continued strong demand we are seeing in the export market.

The real concern from this will be on new crop, where ending stocks are already at a minimal 145 million bushels, and reduced carry-in will cut that number even further. There are indications that world soybean demand is stagnating, however.

In April, world soybean use was equal to that of a year ago. In March, world soybean demand was 7.7 percent greater than a year ago. This is a good indication that soybean-buying countries may have front-loaded their purchases in case stocks were depleted later in the year.

This does not necessarily mean soybean demand will decline, but it may have plateaued for now.

China’s corn situation is becoming one of the most-watched fundamental market factors for that complex. China has been steadily increasing its domestic corn production at the rate of 1.6 bushels per acre per year. This is well below the rate of growth that is needed to satisfy future demand.

In order to achieve higher corn yields, China will need to make some considerable changes to farming practices, including more modern equipment and the use of higher-quality seeds, including genetically modified varieties.

Global currency values are having more of an impact on the world commodity market. The U.S. dollar has been climbing in value, which slows demand for U.S. commodities but encourages sales of products from other countries. This is from the fact all world commodities are based on the value of the U.S. dollar, and a stronger dollar makes their goods worth more.

It is also thought high commodity values and a stronger U.S. dollar will encourage world grain production, especially in South America.

While currency values would encourage grain production in countries such as Brazil, other factors may limit any future expansion. One of the primary ones is infrastructure, as regions where corn and soybean production would expand have limited access to export channels.

Another restriction for increased production is that Brazil has strict regulations on foreign entities owning land in that country. These factors may push investors to countries in Africa, even though Brazil has the most arable land for use in the world.

While weather is greatly affecting developing crops, it is having other implications on grain production. Unless rain falls in the Plains and Midwest, we may see less double-cropping than previously thought. This is a little concerning for the soybean complex, as it was hoped this activity would help build domestic reserves.

Ukraine is set to become the world’s second largest corn exporter, pushing the supplier past Argentina to only trail only the United States. Corn production in Ukraine is expected to rise 5.3 percent this year, giving it a sizable amount of exportable corn.

Japan is already a significant buyer of Ukraine corn, as are several other Asian countries, due to reduced freight. The U.S. market is closely watching China to see if that country shifts its interest to Ukraine as well.

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 and column 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.