On The Money Grain Commentary 1-19-17

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Corn Outlook:

Corn futures have traded to their highest mark since November riding on the back of soybeans. As of last week, the funds were short 345 MB, and additional strength could be seen if they cover. News for the moment is sparse, but attention is starting to turn to planting estimates for this spring. According to Ag Watch’s analysis, there is a 45 percent probability that corn acres for 2017 could fall by 6.0 million. Looking at other developments, export inspections were termed routine at 34.9 MB, and below the average needed to reach USDA’s target of 2.225 BB. For the next few weeks, corn may be a follower of soybeans, but could become a leader once the acreage debate begins in earnest.

Bean Outlook:

Fund buying beginning late last week has propelled soybeans to their highest level since July 2016. The strength is being attributed to weekend rains in Argentina causing localized flooding. However, the market seems to be ignoring the following facts: One, a record crop is on tap in Brazil, as well as in Paraguay and Uruguay, which will offset any losses in Argentina; Two, global stocks-to-usage at 24.9 percent are at their fourth highest level which does not reflect a supply shortage; Three, export inspections have fallen for the ninth consecutive week to 51.7 MB, while the pace of shipments has declined 44 percent from its peak. These factors are not supportive of higher values, which implies that something else could be brewing. Taking a closer look at the picture, what appears to be happening is that large traders are posturing for an uptick in inflation in addition to expectations for three interest rate hikes by the Fed this year. Other markets have been sensitive to this possibility, as well, such as bonds, coffee, sugar and the metals.

Wheat Outlook:

Wheat futures have been trending upward since last week because of the reduction in planted acres, as well as fund short covering. The funds have been covering their short position for three weeks and reduced it to 465 MB. More short covering may be forthcoming. Meanwhile, global stocks are overly abundant, which means the upside is probably limited. Looking at exports, inspections last week were certainly offered no thrills at 12.6 MB. This is short of the average of 19.0 MB needed each week to reach USDA’s target of 975 MB.

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