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The fundamental outlook for corn is improving, but the market is struggling to gain traction because of excessive soybean stocks and the trade rift with China. Domestic stocks-to-usage are their lowest in five years while global stocks-to-usage are their smallest since 2015. With the holiday season upon us, interest in the grains is likely to wane. A factor that has weighed on corn the past few weeks is that exports have been on the downswing since early October with shipments falling nearly 23 percent. Inspections last week were mundane at 31.3 MB and below the average of 48.2 MB needed to reach USDA’s target of 2.450 BB. Meanwhile, harvest is approaching the finish line with only a week, maybe two, before it is complete. Currently, the funds are mostly inactive holding a short position of 160 MB as of last week.
Getting the trade talks back on track between the U.S. and China is like shifting sand. It changes with the wind! A week ago, traders were optimistic that the infrastructure for an agreement might be reached at the G-20 meeting late this month. However, that apparently went up in smoke because of the discord in the Asia-Pacific summit last weekend. Eventually, the dissention between the two super powers will be resolved, but it will take time, and returning to the levels of business prior to the tariff is unlikely. Meanwhile, exports slipped last week with inspections at 38.7 MB. However, they were above the average needed to achieve USDA’s forecast of 1.9 MB. Harvest is winding down but is slow to wrap up in Missouri, Ohio, Michigan, Tennessee, and Kentucky. Looking at the funds, they are short 560 MB and may add to their position if weather continues to cooperate in South America.
Wheat is like corn in that the fundamentals are slowly improving. However, the factor weighing on the market is the lack of exports. Eventually, exports from the Black Sea Region will diminish but that may not occur until early next year. There was a pickup in shipments last week with inspections a marketing year high of 18.7 MB. However, that is still below the average of 23.7 MB needed each week to reach USDA’s projection of 1.025 BB. Currently, we are on course to ship 764 MB. In other developments, the crop rating rose one-point to 55 percent in good-to-excellent condition. As of last week, the funds were holding a short position of 250 MB.
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