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Grain futures have hit a stone wall from rising tensions between the U.S., members of the G-7 and NAFTA over import tariffs. On Friday, import tariffs with China are due to go into effect which has heightened concerns that they will retaliate against the grains. In the meantime, weather through the end of June looks benign meaning the door is closing for a weather-related rally. Last week, the crop rating for corn fell one point to 77 percent in good-to-excellent condition but is still well above the 10-year average of 69 percent. Export inspections last week were 55.4 MB, their lowest since March. Looking at the funds, they abandoned 325 MB of their long position reducing it to 700 MB. Although domestic and world stocks are tightening, traders are skittish for the moment.
As mentioned in the corn comment, an import tariff against China is due to go into effect on Friday which is raising concerns that the Chinese will retaliate against soybeans. The Trump Administration is making it clear to them that they mean business. This has struck fear throughout the ag markets. However, one must remember that to be a successful negotiator, it must be stressed to the opposite party–you give me something and I will give you something! Looking at weather, it is favorable for crop development for the rest of the month. While the door is closing for a weather event in corn, there is still a chance for one to occur in soybeans. Last week, the crop rating fell one-point to 74 percent in good-to-excellent condition and compares to 67 percent for the 10-year average. Export inspections improved slightly at 23.6 MB, but the pace of shipments has slipped the past three weeks. Looking at the funds, they whacked 220 MB from their longs last week reducing them to 185 MB.
Wheat has held up well even though corn and soybeans have been on the defensive. Harvest is getting underway at 14 percent complete, but hedge pressure may be largely absent this season given the deterioration of yield potential. Ongoing problems in the Black Sea Region because of early season heat has diminished yield prospects in that area. The first week of export inspections for the new marketing year at 13.5 MB are nothing to stir much excitement. Looking at the funds, they have trimmed their shorts to a modest 75 MB.
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