On The Money Grain Commentary 2-22-18

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Corn Outlook:

Weather in South America, especially Argentina, continues to be front and center on everyone’s radar. However, the emphasis will turn to the Midwest in March as the U.S. Drought Monitor shows a wide swath of dryness in the western Corn Belt and the Southeast. Meanwhile, the funds have abandoned their shorts in corn, as they bought 415 MB last week putting them long a token 55 MB. In past years, when they have flipped from a short to a long position in February, their longs have risen as much as 405 MB to 1.035 BB. This implies that they have room to add to their position. Corn exports have been steadily rising since November with inspections last week at 36.9 MB. However, they have a long way to go if they are to reach USDA’s projection of 2.050 BB.

Bean Outlook:

Soybeans continue to be influenced by weather in Argentina and, to an extent, the Federal Reserve’s intention to hike interest rates 3-4 times this year. Speculation has risen that Argentina’s crop could fall to 46-47 million tons compared to USDA’s current projection of 54.0 million. Their critical growing period is mid-February to mid-March. By the same token, one private estimate projects Brazil’s crop rising 3.6 million tons to a record 115.6 million. Meanwhile, the funds flipped from a short to a long position last week when they bought 290 MB. This put them long 60 MB. When they reversed their position in February 2016, they accumulated a long position of 1.075 BB. However, that may not occur this time as global stocks are at a record level. Looking at exports, inspections last week were the second lowest of the season at 35.2 MB. Since November, the pace of shipments has fallen 49 percent. On average, shipments fall 85 percent before the marketing year ends.

Wheat Outlook:

Gains in corn and soybeans, along with dry conditions in the southern Plains have been a supportive influence in wheat. In addition, Russian wheat offers are at a 3-year high which could swing some export business to the U.S. Looking at the funds, they shed 90 MB from their short position last week reducing it to 380 MB. Exports inspections last week were mostly run of the mill at 15.5 MB. At the current pace, it will be a photo finish as to whether USDA’s projection of 950 MB will be reached.

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