On The Money Grain Commentary 1-10-19

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Corn Outlook:


The grain industry continues to fly blind because of the government shutdown as many reports are unavailable.  However, traders are muddling through the inconvenience and more interested in the trade negotiations between the U.S. and China.  China has approved 5 genetically modified crops that include corn, soybeans, and canola for import which is creating optimism for a longer-term trade agreement.  Other than that, trade officials are staying mum.  Meanwhile, China has expressed interest in expanding their ethanol capacity which would be a boon for corn exports.  Rumors are circulating that they might purchase 2-5 million tons.  Looking at exports, inspections last week were below estimates at 19.7 MB, a marketing year low.  Although there was a one-day interruption because of New Year’s, shipments should have been in the 27-28 MB range.


Bean Outlook:


Ideas that China will come back to the U.S. as a large buyer of soybeans may be wishful thinking for a few reasons.  One is we do not know the full impact of African Swine Fever on their hog population.  It will probably translate into fewer imports from both the U.S. and Brazil.  Second, Brazil has already displaced the U.S. as the world’s largest exporter as they command 51 percent of the global share.  During the past few weeks, it has been rumored that China would purchase 5-8 million tons of U.S. soybeans.  Chatter among traders is they are probably close to the 5-million-ton mark now.  This could fulfill their goodwill buying.  As mentioned in previous comments, if China purchased 10 million tons, it would equate to shipments of approximately 7 MB each week.  This is a far cry from the pre-tariff days of 15-30 MB being shipped on a weekly basis.  Last week, export inspections were 24.7 MB and below the average of 37.1 MB that need to be shipped each week to reach USDA’s target of 1.9 BB.


Wheat Outlook:


I know it sounds like an old broken 45 rpm record, but wheat needs a fresh story to break from the ties of lagging exports.  Last week, inspections were a paltry 9.5 MB, the second lowest of the season.  Furthermore, conditions are favorable in the Plains as no damaging cold weather is in sight, plus no cold outbreaks are forecast in the growing areas of Europe and the Black Sea Region.  These factors continue to overhang the market and may limit the bargain hunters’ interest unless a catalyst intervenes to change sentiment.


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