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Macroeconomic and geopolitical issues continue to overshadow fundamental factors in the grains making marketing decisions extremely difficult. That was apparent early this week when Russia increased its aggression toward Ukraine causing grain futures to spike. Meanwhile, the Fed may raise interest rates more than anyone can fathom to bring inflation under control. This will likely be followed by a nasty recession, or even worse. Looking at corn, exports remain sluggish with inspections last week only 18.0 MB. This week, the USDA lowered their forecast 125 MB to 2.150 BB. Harvest is progressing at normal pace of 31 percent versus the average of 30 percent. The bottom line in corn is that stocks are tighter, but usage is declining because of the strong dollar.
Soybeans got a boost mid-week from the USDA lowering its yield estimate more than expected to 49.8 bpa. While this looks friendly on the surface, the market faces some hurdles. One is that exports have been downgraded 40 MB to 2.045 BB. Others are that global stocks are on the upswing, Brazil’s production has been raised 3.0 million tons, and their exports increased 500,000 tons. Meanwhile, their currency, the real, is at a substantial discount to the U.S. dollar which could hinder exports further. However, inspections last week were a marketing year high of 35.6 MB. China took 25.3 MB, their largest shipment for the season. In other matters, harvest is progressing at brisk pace of 44 percent done compared to the average of 38 percent. For now, the bottom line for soybeans is that for values to post substantial gains, a weather problem will likely have to occur in South America.
Wheat continues to be influenced by the Ukraine-Russia conflict. Russia’s increased aggression early this week caused prices to spike from concerns that their agreement allowing exports from the Black Sea Region could be in jeopardy. Russia said on Thursday that they will opt out of the agreement unless their complaints are addressed. Until there is a settlement in the conflict, volatility in wheat will persist. Looking at exports, inspections last week were 22.5 MB and remain impressive even though the dollar is at a 20-year high. However, the USDA lowered their export projection 50 MB to 775 MB in the crop report this week. In other matters, winter wheat planting is running slightly behind the normal pace at 55 percent complete compared to the average of 58 percent.
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