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Weather in South America and the Trump Administration’s trade policies dominated the headlines in grains this week. Worry is mounting about the impact that renegotiating trade agreements could have on the ag sector. Trump’s nixing of TPP has agitated a few farm groups. Meanwhile, looking at other issues, the argument is beginning as to how many acres of corn will be lost to soybeans. Most estimates are around 5.0 million, but as I mentioned in a previous comment, there is a 45 percent probability that it could be 6.0 million or more. Export inspections were a nonevent at 37.9 MB, and below the average needed to reach USDA’s target of 2.225 BB. For the third consecutive week, the funds liquidated their shorts reducing them 110 MB to 235 MB. The increase in open interest recently implies that additional liquidation is likely.
The bulls have mustered about all the mileage that they can pertaining to losses from flooding in Argentina. As mentioned in a previous comment, Brazil is headed for a record crop, and so is Uruguay and Paraguay. This should offset losses in Argentina. However, the bulls are not going to be deterred easily, as they increased their long position 190 MB last week to 600 MB. Looking at exports, inspections fell for the tenth straight week to 47.4 MB. Since November, shipments have fallen 48 percent from their peak. The minimum decline going into the end of the marketing year has been 63 percent with the average being 83 percent. With expectations for a sharp increase in planted acres this spring, and the potential for record global production, the rubber at some point, will meet the road.
Wheat has been working higher since December gaining support from the rise in soybeans. However, the market faces some obstacles. One is a record world supply. The other is that exports offer few bragging rights as the pace of shipments has fallen 32 percent in the past four weeks. Last week, inspections were a mere 10.1 MB. Currently, the factor supporting the market is the threat of short covering by the funds who are holding shorts of 490 MB.
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