The USDA believes net ag income will hit its highest level in 40 years this year. Net farm income is expected to rise 3.7 percent to $122.2 billion. This is mainly from record-high commodity values brought on by the drought that hit the United States, as well as widespread insurance claims.

Not all farm sectors benefitted from this situation though, as high feed costs devastated the country’s livestock and dairy industries, causing many of those producers to break even, at best.

Weather conditions over the past several weeks have moderated across the Midwest, and now trade is debating how much they may have benefitted crop development. Many field scouts claim corn received little if any benefit from recent rains and cooler temperatures, but soybeans may have.

This makes it difficult to try to determine final yields, primarily on the soybean crop. While rains have likely benefitted some soybean fields, there are also reports of whole fields dying from lack of moisture.

We are starting to see a shift in how weather impacts the commodity market. The most attention on wheat is now on South America, as those countries begin their planting season.

We are seeing more outlooks calling for an El Nino system to develop, which would be a great benefit for grain production in South America. There is still concern on U.S. weather, though – mainly how much of the drought conditions will improve by next spring.

The United States may see more competition from South America on corn this year than initially thought. South American corn production is even larger than expected, which is allowing those countries to offer corn at a substantial discount to the United States.

At the present time Argentine corn can be booked at a $1 per bushel discount to the U.S. This even has some domestic corn users considering imports, more than originally expected.

There are questions rising over future soybean demand. Right now, the United States has a record 54 percent of the total soybean sales that are expected for next year already on the books.

Not only is this a record for being early, but the total volume of soybeans booked is a record, as well. Some economists claim the only feasible way of slowing this demand is with a change in government policy; mainly, some form of an embargo.

The United States could soon lose its edge in the world commodity market. Between now and 2020 China’s soybean imports are forecast to double to 4 billion bushels. Some economists do not believe the United States will be able to satisfy this increased demand using our current infrastructure system.

This is concerning, as buyers such as China were always willing to pay a higher value for U.S. soybeans, knowing they would be delivered in a timely manner.

Concerns are building over the quality of this year’s corn crop. We are still hearing reports of high levels of toxins in corn, especially in fields where plants tipped due to high winds or were subject to drought.

We are also receiving reports of light test weight in newly harvested fields. The concern with these conditions is when combined with elevated futures, our corn becomes even less attractive in the global market.

Trade continues to debate how long the United States’ new-crop soybean inventory will last. Given the current use rate, it appears as though inventories will be depleted by late March.

Some analysts are not agreeing with this, however, and believe the United States will likely draw soybean stocks to a bare minimum, but not run short ahead of next year’s harvest. Their opinion is that once soybean sales reach 100 percent of expectations, buyers will secure their needs from another source.

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.