Even though we have yet to harvest this year’s crops, trade is already looking forward to next year’s production. The most interest in the domestic market is if we can see enough acres shift from soybeans to corn to produce an adequate crop to satisfy demand.

Even though heavily debated, trade is projecting this year’s harvested acres at 82 million on corn and 75.9 million on soybeans. There are some thoughts that corn acres will still drop because of the heavy amount of prevent-plant acres that are still unaccounted for.

What trade is looking at is how many additional acres will be needed next year to satisfy demand. At present it appears as though 10 million more corn acres will be needed from this year.

The question is how the market will achieve this transition. The current price spread between new-crop corn and soybeans stands at just over 2:1 – this means it takes two bushels of corn to equal the value on one bushel of soybeans. Historically, this should help push acres towards corn production.

In the current market environment, this spread may have to get much closer. It is not out of the question we may need to see this fall to 1.5:1 or tighter, given the cost of production to corn over that for soybeans.

Production is also becoming more of a focal point in South America as those countries are close to their planting season. The most attention has been on Brazil, where soybean plantings are forecast to increase this year. Brazilian farmers are expected to expand planting by 2.3 percent, as that crop will likely have a better return than will corn.

Brazilian farmers are also expecting to see the trade issues between the United States and China linger, keeping the door open for them to make more exports.

Early estimates are for Brazil to produce a soybean crop for next year of nearly 123 million metric tons, compared to this year’s 117 million. Even with corn acreage in Brazil holding steady, crop scouts believe production will be 4 million tons larger than this year due to improved farming practices and favorable weather.

There are also thoughts we will see expanded plantings in Argentina this year, mainly for corn. Argentina has seen a sizable increase for corn this year and wants to remain a supplier for the global market.

The one commodity trade is worried about in the global market is wheat. World wheat balance sheets remain at a near-burdensome level, even with regions of lower production. This is why wheat futures have failed to react to news of lost acres or weather loss on production as much as expected in recent months.

Trade is keeping a close eye on South American currency values. Both the Brazilian real and Argentine peso have seen their value erode compared to the U.S. dollar. This can have two different impacts on the global commodity market.

For one, it is not uncommon to see elevated export sales from countries when their currency value drops, as commodities are based on the U.S. dollar, meaning they are worth more to a producer. Another is it can lead to elevated plantings, as returns can be locked in at higher values. Given the fact the South American planting season is just weeks away, this will be closely monitored.

More attention is starting to be placed on crop maturity levels. Crop progression has been slower than average all growing season. The concern now is at what stage of maturity the crops may be at when the year’s first frost or freeze takes place.

Some models indicate this could bring an early end to the growing season, impacting both yield and crop quality. While this may reduce crop sizes, it may also reduce demand if the grain or soybeans are in poor condition.

Chinese officials have updated their commodity needs. China lowered its soybean needs for the 2018/19 marketing year to 83.5 million metric tons. This is 1.5 million lower than the projection that was made in July, as African swine fever (ASF) continues to spread across the country. Chinese officials did increase their corn import projections for this year, though, as they avoid U.S. sorghum imports.

China also revised its long-range corn outlook projection. Chinese officials believe the country will plant less corn in the next crop cycle, as farmers opt to seed soybeans instead. Higher returns and a greater demand are the leading reasons for this shift.

Officials are not optimistic on any commodity demand right now, though, as ASF continues to reduce the size of the country’s hog herd. Sources continue to report China has lost between 24-50 percent of its hogs from the disease.

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.