The corn market was shocked when the USDA published a revised plantings acreage number of 91.7 million – an unbelievable 1.9 million acres more than what was published in the June supply and demand report. This was also 4.7 million more than the average trade guess.

Corn stocks as of June 1 were reported at 5.2 billion bushels, 2 percent less than a year ago. On-farm corn inventory stands at 2.95 billion bushels, a 7 percent increase on the year. These stocks indicate a March to May corn disappearance of 180 million bushels more than a year ago.

The additional corn acres came from soybeans, as their planting was reduced to 80 million acres; this was 4.7 million under trade expectations. The USDA has stated it will revise its planted acres in the July balance sheets, though, which casts a shadow of doubt over this figure.

Soybean reserves on June 1 totaled 1.79 billion bushels, a large 47 percent increase from a year ago. Of these, 730 million bushels were held on-farm, which is 94 percent more than last year. Last quarter’s soybean usage was 5 percent greater than last year, at 937 million bushels.

Wheat figures came out pretty much as expected across the board. All wheat acres are projected at 45.6 million, which was equal to trade expectations. Wheat stocks were just under the average estimate, at 1.07 billion bushels. March to May wheat usage totaled 521 million bushels, which was up 32 percent on the year.

Weather data show the month of June will go down as a record-setter across the Corn Belt. June has the region on track for 11 straight months of above-normal precipitation. This will also make the last 12 months the wettest for the Corn Belt in the past 125 years.

The question now is if these conditions will continue, or if we see a complete reversal to drier-than-average conditions.

There are two well-defined opinions forming in the market surrounding recent weather in the Corn Belt. The question is if the recent lack of heat units is negative for production or beneficial, as the crops have had limited stress. This also brings into the question whether recent growing conditions are as negative as we believe given today’s plant genetics.

We are starting to see more attention placed on commodity demand, mainly for corn. In its latest supply and demand report, the USDA reduced corn demand 425 million bushels for this coming marketing year, from a combination of lower inventory and higher values.

There are thoughts we could easily see another 200 million-400 million bushels reduction to corn usage by the end of the marketing year. The debate surrounding this situation is if corn demand will be curtailed by price or by competition from other sources in the world market, mainly South America.

South American corn production forecasts are rising at the same time U.S. production is decreasing. We are also seeing larger crop estimates out of Ukraine. When added together, these three suppliers are expected to produce nearly 2 billion bushels more corn than a year ago.

The real question surrounding this topic is if corn demand even needs to be cut. The current new-crop carryout projection is for 1.675 billion bushels. While this is tighter than early forecasts, it is not uncommon to see ending stocks that low.

The question is if crop size continues to decrease and we get to a point where corn needs to be rationed – that will change the dynamics of the entire corn complex and make price prediction difficult.

These issues are not a problem in the soy complex and, in fact, just the opposite is taking place. Soybean carryout is more than 1 billion bushels on old crop and just under it on new crop, at 995 million. It is quite likely both figures will increase over the remainder of the marketing year, especially if soybeans gain acres that were intended to be seeded to corn.

Rather than rationing, as in corn, the question is how competitive soybean values need to be to encourage demand, especially with trade issues and tariffs elevating the cost of our soybeans above the global market.

Some private analysts are not as optimistic on U.S. ending stocks. For corn we are starting to see a range from 1 billion-1.2 billion bushels. For soybeans we are starting to see estimate of 500 million-700 million bushels.

While these are roughly 50 percent of what trade was initially forecasting, we are now starting to see demand slow, indicating these may be the lowest ending stocks predictions we see.

A result of this production loss is a much-improved regional basis. It is not uncommon to see corn basis values for immediate ship bushels as much as 50 cents over CME futures. Even with bids at this level, farmers are hesitant to make sales, as they are worried over new-crop production and may need old-crop bushels to fulfill these commitments.

Karl Setzer is Commodity Market Analyst for AgriVisor. His market commentary can be found on Twitter via @ksetzergrains

The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.