On The Money Grain Commentary 3-16-17

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Corn Outlook:

Grain producers are facing a new growing season with an 800-pound gorilla on their back. A record crop in South America that keeps getting bigger, and large stockpiles in the U.S. With corn values declining as a result, it raises the question as to how many more acres will be diverted to soybeans, and what are the chances of an exceptional yield for the third consecutive season? These questions will be answered in the weeks ahead. The bright spot in corn has been that exports have improved. Last week, inspections were a marketing year high of 60.9 MB. Meanwhile, the pace of shipments has risen 66 percent since mid-January. Looking at the funds, they have reduced their longs to 330 MB. While these are promising spots, abundant supplies overhang. However, that could change if Mother Nature does not cooperate this spring-summer.

Bean Outlook:

Traders were preoccupied all winter with weather in South America that included flooding in Argentina and potential dryness in Brazil. However, all of that has changed with Brazil 56 percent done harvesting a record crop, record world stockpiles on tap, and the potential for record acres planted in the U.S. this spring. Compounding the situation is that exports have been on the down swing. Since November, the pace of shipments has fallen 69 percent and could decline as much as 83 percent. The Planting Intentions Report is just around the corner, and with the corn-soybean price relationship at 2.58:1 in favor of soybeans, a huge shift could be in the making. In the meantime, the funds were holding a long position of 515 MB as of last week. For the moment, it appears that the reality of an oversupply may finally be creeping in on soybeans.

Wheat Outlook:

Record global stockpiles of wheat and declining values in corn and soybeans have pulled wheat futures lower. Although the pace of exports has risen 78 percent since late January, and the funds are sporting a short position of 435 MB, only modest support has been offered. However, a factor that could come into play is that the crop, especially in the Midwest, is about four weeks ahead in development because of above normal temperatures in January and February. In addition, temperatures in the low 20’s are forecast in much of the Midwest this week which could cause freeze damage. Furthermore, let’s not forget that we still have April to get through.

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