Very few changes were made to the corn balance sheets in the June USDA supply and demand report. Ending stocks were left unchanged on both old and new crop, with 851 million and 1.88 billion bushels, respectively. The only adjustments that were made to usage were on old crop.

The USDA increased corn for ethanol use by 50 million bushels from the previous report, but made an equal reduction to projected exports.

More noticeable changes were made to soybean balance sheets. The USDA increased both soybean exports and crush to reduce old-crop carryout 35 million bushels, to a tight 175 million bushels total.

New-crop soybean ending stocks were also reduced by 5 million bushels and now total an incredibly tight 140 million bushels. This has dropped new-crop stocks to use to a tight 4.3 percent and leaves no room for any production loss this season.

It is not out of the question that the United States could deplete its new-crop soybean supply. Global soybean production is down 1 billion bushels this year from last, which is going to create a void that needs to be filled.

Many buyers have already started increasing their soybean buying from the United States, as a result. The only way to prevent a total depletion of soybeans is through significant price rationing.

Market economists are starting to use yield estimates on corn to predict futures values. At the present time these individuals claim trade is factoring a corn yield of 159 bushels per acre into the market.

If we would happen to see corn yields closer to trend of 164 bushels per acre, futures would likely decline to $4.60 per bushel.

If corn yield would slip to 155 bushels per acre, corn futures would climb to $6.50, according to these economists.

Corn use for ethanol is running at a higher rate than expected. It appears as though the ethanol industry will consume 3 percent more corn than a year ago. The USDA, however, is projecting a 1 percent decline in corn use by the industry.

This difference could put total corn consumption for ethanol manufacturing at 5.1 billion bushels rather than the 5 billion that is predicted.

Trade continues to argue the importance of corn crop ratings, especially this early in the growing season. Many traders claim the data are useless, as a crop can look good, but still have a poor yield. This is from the fact ratings do not account for factors such as ear fill or test weight.

It is interesting to note that in 11 of the past 12 years, corn ratings early in the season have been an extremely poor indicator of the final crop.

Not only is China importing a large volume of soybeans this year, but a large amount of canola, as well. China is forecast to import 2.5 million metric tons (mmt) of canola this year, and again in 2013.

This is up from the 2.33 mmt it imported in 2011. The majority of this canola is expected to come from Canada, and will help China reduce the amount of more expensive soybeans it needs.

Chinese corn needs are being more heavily questioned by trade; analysts believe China will need to import 40 million bushels more corn than currently projected. The real question, however, is from where this corn will come.

Argentina, Ukraine and now Brazil are working through the details of trade agreements to open corn trade between them and China. It is quite possible the United States will see none of this increased corn trade with China, and may even lose some current business.

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.