On The Money Grain Commentary 7-12-18

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Corn Outlook:

Grain futures have been drawn and quartered stemming from the publicity of the trade war with China and the Trump Administration’s recent announcement of new tariffs on an additional $200 billion of Chinese goods. Right now, both the U.S. and China believe that they hold the upper hand in the dispute which means mending fences could take a while. USDA lowered their 2018-19 ending stocks estimate for corn 25 MB to 1.552 BB. Global stocks fell 2.7 million tons to 152.0 million. This was good news to the ears of the bulls. Looking at the funds they have added to their shorts for the second straight week increasing them to 180 MB. Until there is resolve in the trade dispute, they may add to their position.

Bean Outlook:

Fear reigns that China will fulfill the needs of feeding its livestock industry at the exclusion of the U.S. soybeans. While those needs are currently being met by South America, in late summer-early fall they will have to seek another source or an alternative protein. That could come from Brazil importing U.S. soybeans, or Japan or South Korea acting as a third party. Meanwhile, USDA inflated their 2018-19 ending stocks estimate for soybeans 195 MB to 580 MB. This reflects a 250 MB loss in exports arising from the trade dispute with China. As a result, global stocks grew a whopping 11.3 million tons to 98.3. This will likely keep the bargain hunters at bay until they feel the dust is beginning to settle. Regarding the funds, they have added to their shorts for the third straight week increasing them to 390 MB.

Wheat Outlook:

Sloppy exports, plus weakness in corn and soybeans remain a thorn in the side of wheat. For the second week in a row, inspections set at marketing year low at 9.8 MB. Meanwhile, USDA raised their 2018-19 ending stocks estimate for wheat 39 MB to 985 MB. However, global stocks fell 5.3 million tons to 260.9 million. This reflects production losses in Australia, the EU, and Black Sea Region. This could begin to stir some speculative interest. Looking at the funds, they have reduced their short position to 125 MB.

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