On The Money Grain Commentary 2-2-17

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Corn Outlook:

Grain traders are perplexed as to whether the Trump Administration’s recent actions and rhetoric will put the U.S. in the cross hairs of a trade war with Mexico, China, Japan, and possibly others. If it happens, grains and other ag products could be in the line of fire. Because of this, the water has been muddied. The uncertainty comes at a precarious moment as the funds bought 305 MB of corn last week flipping from a short position of 235 MB to a long of 70 MB. In the meantime, export inspections saw an improvement at 41.8 MB, but were below the average of 43.8 MB needed to be shipped each week to reach USDA’s projection of 2.225 BB. While the acreage debate usually begins by this time of the year, the uncertainty surrounding a trade riff is taking precedence for the moment.

Bean Outlook:

The bears came out swinging on Monday from fear of a trade dispute between the U.S. and China. This caught the bulls off guard as the funds increased their longs 170 MB last week to 770 MB. This is their largest positon since last July. Meanwhile, prices recovered on Wednesday. Right now, the market faces a strong headwind from more seasonable weather in Argentina, improving conditions in Brazil, and uncertainty as to what may come out of Washington. While it has probably been overlooked, the one bright spot is that export inspections saw an uptick last week to 59.9 MB, the first seen in eleven weeks. However, this has not broken the trend of declining shipments.

Wheat Outlook:

Wheat has mostly been a follower of corn and soybeans. Exports were a nonevent last week at 11.8 MB and below the average of 19.8 MB needed to be shipped each week to reach USDA’s target of 975 MB. For the past five weeks, the average pace of shipments has declined. Meanwhile, the funds added 5 MB to their short position last week increasing it to 495 MB. Right now, the primary catalyst that could turn the market around would be for the funds to bail on their shorts.

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