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Although the USDA projects an increase in corn acres for 2019, it has the brightest outlook of the grains. When you consider global stocks for 2018-19 are forecast to be down 9.8 percent from a year ago, and demand projected to be up 4.3 percent, this is a drawdown of 14.1 percent that implies that a production shortfall will not be tolerated. So far, there are no weather issues in South America, but that could change. Looking at exports, inspections last week were 44.7 MB and must average 47.9 MB each week to reach USDA’s target of 2.450 BB. Currently, we are on track to ship 2.087 BB. Harvest is slowly ending at 84 percent complete compared to 87 percent for the average. As of last week, the funds were short a modest 85 MB.
Traders are hopeful that the Trump Administration and President Xi of China will reach some type of agreement at the G-20 meeting late this month. However, even if relations thaw, it is unlikely that business will return as usual because of South America’s increased role as the primary supplier of soybeans to China. Overhanging the market is the fact that 2018-19 global stocks of soybeans are 12.4 percent above a year ago while demand is up 4.5 percent. This amounts to a net gain in stocks of 7.9 percent. With stocks already at a record level, it is difficult to paint a bullish picture unless a threat to production arises in South America or the Midwest during the growing season. Meanwhile, export inspections last week were the highest of the marketing year at 47.8 MB. While China was a no show, Argentina took 9.1 MB. Harvest is winding down at 88 percent done compared to the average of 93 percent. As of last week, the funds were short 515 MB.
The fundamentals for wheat are slowly improving as global stocks for 2019 are down 4.4 percent from a year ago. Additional supportive factors are the decline in Australia’s production and the slow emergence of the crop in Kansas and Oklahoma. However, overhanging the market is the fact that global demand is flat, and U.S. exports continue to take a back seat to the Black Sea Region. Inspections last week were 12.5 MB and must average 23.5 MB to reach USDA’s projection of 1.025 BB. Crop conditions improved 3 points last week 54 percent in good-to-excellent condition. Looking at the funds, they were short 330 MB as of last week.
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