The state of the global economy remains a significant factor in commodity market price discovery. Some currencies in the global market have started to gain on the U.S. dollar, which is good news for the U.S. market.

A strong dollar has hampered export sales in recent months, and the balancing of these values should make our offerings more appealing. While this is true, the question now is how many buyers have needs covered and if they need additional imports at any value.

Another side of the global economy that is receiving attention is how it will impact production. This is especially the case in Brazil where farmers are facing a situation that is worse than that in the United States.

Unless the situation in Brazil corrects itself soon, it may impact next year’s plantings. This does not necessarily mean reduced production though, as farmers may focus on better producing acres rather than marginal ones.

The economic issues in U.S. agriculture may linger for some time. Lenders in the United States saw a 2 percent increase in farm loan defaults from last year to this year.

This rate is expected to increase 5 percent next year. A large amount of loan restructuring is also taking place, which will only benefit a farmer if the market is quick to correct itself.

Not only was last year financially rough on U.S. farmers, but all who are involved in commodity markets. As reported 979 hedge funds closed down in 2015, a 13 percent jump from 2014.

Very few new hedge funds started up during the year as well. Economists claim 2015 was the worst year for hedge fund performance since 2009. This lack of fund activity is one of the leading factors behind the recent lethargic futures trade.

There is a difference in opinion over the current commodity price projections being used by the USDA. Other groups claim commodities will average more than the USDA projects, some by a sizable amount.

While this may be true, all forecasters are holding average values below the cost of production. The best chance of correcting this situation will have to come from weather, and even then, it may benefit new crop more than old.

Commodity values appear to have stabilized in recent weeks, and some analysts believe this is a sign we will soon see a market recovery. While this is fully possible, how much we may gain is questionable. The United States still needs to remain competitive with other sources in the world market on price, especially South America.

This equilibrium has as much to do with currency values as the value of the commodity.

We are at a point in the marketing year where volatility tends to increase. This is seasonal, and typically the result of added weather premium. Volatility may be even greater this year given the large short position that has been established, and how many analysts are focusing more on the negative side of the market than the positive side.

This alone could cause a short covering rally, even if it is short lived.

One factor that may not influence trade that normally does at this time of the year is competition for acres. In many springs we see corn and soybeans compete for uncommitted acres.

This is especially true if ending stocks of one commodity or the other is in short supply. Given the fact reserves of both commodities are more than adequate, this bidding war is unlikely to transpire.

The volume and types of inputs that were applied last fall may also limit acreage shifting this year. If fields were fertilized last fall with the intention of planting corn, it is highly unlikely these will be seeded to soybeans.

One of the most bullish factors in today’s market may actually be the large short position that is being held by the fund crowd. This is taking place at the same time there is limited risk premium in the market ahead of the spring planting season and the general outlook on the market is bearish.

While this may instigate a recovery in the market, it may not be enough to cause a full rally. The stocks-to-use on commodities is not at a point where actual buying would be expected.

Karl Setzer is a commodity trading advisor/market analyst based in the West Bend office of MaxYield Cooperative. He can be reached at (800) 383-0003.