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The ag industry welcomed the reopening of the government, but it may only be temporary. President Trump has made it clear that if Congress is unwilling to fund the border wall, there will be another shutdown on February 15th. In the meantime, the reopening brings business back to normal for the moment, as the daily reporting systems are up and running again. In addition, a slew of delayed reports stemming from the shutdown, as well as the February Supply-Demand Report, will be released on February 8th. In other developments, traders are cautiously hopeful for a positive outcome in the trade negotiations with China that are currently underway. Looking at corn, export inspections were disappointing at 35.1 MB and below the average of 51.5 MB that need to be shipped on a weekly basis to reach USDA’s projection of 2.4 BB.
Traders are hopeful that the negotiations with China will produce a positive outcome. However, resolving all the issues in a couple of meetings is unlikely. Some token soybean purchases are possible, as the Gulf basis has improved recently for February-March delivery. Meanwhile, getting back to pre-tariff levels is doubtful. China has already purchased 5 million tons of soybeans and may take up to 8 million. Even if they took 10 million tons, it averages out to 7 MB per week. This is much less than the 15-30 MB China received on a weekly basis prior to the tariffs. Last week, inspections were 34.1 MB and must average 37.0 MB each week to reach USDA’s projection of 1.9 BB. In other developments, there have been concerns about dryness in southern Brazil, but with harvest underway, it is becoming old news. Meanwhile, Brazil’s production estimate will be looked at closely in the February 8th.
The recent cold snap in the Midwest is underpinning wheat. Exposure to sub-zero temperatures without snow cover could cause potential crop damage. In addition, exportable supplies from the Black Sea Region are shrinking. If so, U.S. exports should get a boost. Meanwhile, inspections last week were disappointing at 13.3 MB and below the average of 26.2 MB that must be shipped each week to reach USDA’s projection of 1.0 MB. Currently, they are on track for 806 MB.
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