On The Money Grain Commentary 12-6-18

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Corn Outlook:

Corn values surged on Monday from news that the U.S. and China have agreed to a 90-day cease fire regarding their trade dispute. However, details are sketchy pertaining to terms. Keep in mind that any such arrangement will probably be piecemeal and slow to materialize at best. Meanwhile, China has huge reserves of corn, as noted from last month’s supply-demand report, which means U.S. exports will not be greatly affected. Looking at exports, inspections last week were 40.7 MB, and below the average of 48.4 MB that need to be shipped each week to reach USDA’s target of 2.450 BB. Currently, they are on track for 2.1 BB. Last week, the funds increased their shorts in corn to 390 MB but have likely covered a portion of their position.

Bean Outlook:

Traders were ecstatic on Monday hoping that the cease fire between the U.S. and China will give soybean exports a big boost. However, details are lacking concerning the amount of purchases, and whether China will remove their tariff on imports. President Trump said that if discussions falter, U.S. tariffs will remain. Right now, there are a lot of questions and few answers. Be aware that disappointment could set in if there is a breakdown in talks, or China’s purchases are slow to materialize. Keep in mind that the outbreak of African Swine flu has had a big impact on their swine herd, which means imports of soybeans and meal could be limited. In addition, one must not lose sight that Brazil’s crop could be as large as 130 million tons. Furthermore, since 2016, their market share of global soybean exports has risen from 42.2 percent to 49.5 percent. During the same period, the U.S.’s share has fallen from 39.9 percent to 33.2 percent. While the truce may allow the pendulum to swing partially back to the U.S., we will not regain the lost market share. Meanwhile, export inspections last week were 38.2 MB and above the average needed to reach USDA’s projection of 1.9 BB. Last week, the funds reduced their shorts to 560 MB and that has likely been reduced further this week.

Wheat Outlook:

Wheat saw limited support from the truce between the U.S. and China early this week but could not hold onto gains. Dismal exports have been the dark cloud overhanging the market as the Black Sea Region continues to get the lion’s share of business. Meanwhile, export inspections last week were 17.3 MB and must average 24.4 MB to reach USDA’s target of 1.025 BB. Currently, we are on track to ship 765 MB. In other developments, global stocks are declining as Australia’s production is expected to fall 2.2 million tons from last month to 16.9 million. This would be their smallest crop since 2008. Looking at the funds, they have increased their short position to 350 MB.

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