Trade continues to disregard the potential situation developing in the soy complex. If the United States continues to consume soybeans at its current pace, the U.S. inventory will be depleted by early spring of 2013.

This is possible even with a projected 1.1 billion-bushel increase in South American production. South America usually does not have new-crop soybeans available for the world market until April, and the United States could easily be out of the commodity by then.

Oddly enough, this situation in the soy complex is being overshadowed by the supply and demand outlook in corn. Since the initial supply and demand outlook numbers were released on corn in May, usage has been cut by 2.55 billion bushels. Some analysts believe this consumption really hasn’t been cut, but is what is projected to be rationed in the future.

While this may be true, it is hard to deny the fact the United States is losing corn demand faster than demand for soybeans.

Trade is using historical data to again try to determine future corn yield estimates. Analysts are using data from the drought years of 1983 and 1993, when final yield was below the projection from the August crop report.

While this did happen, we also have years such as 1988, when the smallest yield estimate of the year was made in August. Given improved weather conditions since the August release, it would not be surprising to see a repeat of that pattern this year.

There are several groups predicting further reductions to the U.S. corn crop size, but there are also those who think it may get larger. One of these is Informa, who in its last crop estimate, predicted the final corn crop size would be 800 million bushels larger than its August estimate.

Given recent changes to weather conditions, this is quite possible. If the United States does not generate more corn demand, this would push corn stocks to a level that would not be concerning.

Questions are rising over how the timing of this year’s harvest will impact balance sheets. There is going to be a significant amount of corn harvested by the time data are collected for next month’s supply and demand report that is released on Sept. 12.

Early harvest could easily impact what is published in the quarterly stocks on Sept. 28. This activity could give the market a falsely higher corn inventory number on both old and new crop at the same time.

What could also be a major factor in grain inventory as we move forward are any adjustments made to U.S. acres, both planted and harvested. Right now the USDA is pegging harvested acres at 90 percent of what was planted. Private analysts claim this number should actually be as low at 85 percent, however, as more corn was used for silage than expected due to drought.

The real surprise may come from planted acres though, as the numbers the USDA has been using for those may be too low by 1 million on corn and 1.5 million on soybeans, according to a recent study.

The federal government is considering the approval of grain sorghum as a raw stock for advanced ethanol manufacturing. Right now the only approved advanced renewable fuel for ethanol is derived from sugarcane.

Research shows ethanol manufactured from grain sorghum is a cleaner fuel, and will not compete with the food grain market such as corn does. The downside of manufacturing ethanol from grain sorghum is availability, as U.S. corn acres outnumber grain sorghum 16-to-1.

Land values across the United Sates are showing their first signs of faltering in value. This is mainly from the huge amount of uncertainty in the market, and how this is limiting investor interest. The most apprehension is coming from the lack of a new farm bill, heavy tax loads and, most importantly, the drought and what it will do to yields and income.

Some of this fear is being countered with high commodity values, but producers know those will eventually set back.

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.