The global corn supply is becoming more of a focal point for the market. According to the latest balance sheets, the world will have a 50 day corn supply at the end of the marketing year. If we remove the highly questioned Chinese corn reserves, this drops to a minimal 31 day supply. Given this outlook, the global market cannot afford any corn loss this production season.

We are also seeing comparisons made between this year and last year in the market, primarily on corn. What trade is focusing on is that U.S. corn stocks are currently 270 million bu tighter than a year ago, and the world corn supply is 40 million metric tons tighter than a year ago. At the same time, spot corn futures are trading at a 40 cent lower level. This is one of the main reasons analyst feel corn should rally from its current value.

When it comes to demand the most attention in the global market right now is on China and their soybean purchases. China is currently buying and importing record volumes of soybeans, with imports at the highest levels of the year. Unfortunately, almost none of these are coming from the United States. This avoidance has more to do with political opinions than commodity values though, which makes it hard to determine when demand will increase.

There are several analysts and farmers alike who believe an end to the soybean trade dispute with China would be good for the U.S. market, but this is not necessarily the case. The end of the dispute is likely going to bring an immediate rally in U.S. soybeans, and an equal collapse in Brazilian soybeans. As a result, we could easily see demand shift back to Brazil from importers that just started buying U.S. soybeans. It is not out of the question that this could actually pressure U.S. exports rather than benefit them.

Soybean futures are currently in a tough spot. Given current economics it appears as though U.S. soybeans are under-valued. At the same time, Brazil is offering soybeans into the global market at a 20 to 30 cent per bushel discount to U.S. offerings. This is a main reason soybeans are not able to appreciate at this time.

Country movement of corn and soybeans remains depressed, which is becoming concerning to buyers and end users. We have seen several attempts to encourage movement, including basis incentives and free storage programs. While these have secured some bushels, deliveries are still not as much as hoped for. Many farmers now want to wait until they can better determine crop size to see just how much inventory they need to move, if any at all.

Trade is trying to determine what the long-term effects of this year’s slow planting pace will be. Most concern is what it will mean for crop development. While crops should have plenty of time to fully develop, they will be very uneven. This will make the window for which weather can be a factor in final yield much larger than usual.

Harvest will also be affected by the unevenness of this year’s crops. The main issue will be different maturity rates and how not all of the crops may be ready for harvest at once. This could actually end up being positive for the market as terminals will not be flooded with new crop deliveries, possibly when old crop bushels are also moving. Interior basis values could easily find support from this situation.

While it seems hard to believe, trade is already starting to prepare itself for the upcoming harvest. This brings about a seasonal change in the market, both on futures and basis. It is not uncommon to see volatility build in the cash market at this time, with buyers only wanting to secure enough old crop bushels to make it to the harvest season. We also start to see less market interest on production and more on demand as this takes place.

Officials are starting to make predictions for Brazilian soybean plantings this year. Current data indicates Brazilian farmers will expand their planting by 2 to 3 percent this year. This would give Brazil a total of 88.9 million acres, and a crop size of 120 million metric tons. While similar to this year, this size of a crop would open the door for more competition for the United States, especially for sales to China.

The official weather forecast for August has been released, and indicates the possibility of less than perfect conditions. N.O.A.A. predicts we will have above normal temperatures and normal precipitation across much of the Corn Belt in August. The concern with this is that we are already seeing a decline in soil moisture levels and these maps do not indicate they will be recharged any time soon. August weather has been a great benefit for yields in recent years, and this outlook does not indicate it will be repeated this year.

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.

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.