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Last week, the USDA took the bulls by surprise when they projected ending stocks of corn at 1.5 BB. However, that is considered old news now as the market has since recovered. With harvest past the halfway mark at 52 percent complete compared to the average of 41 percent, the focus will now turn to soaring energy costs and the growing season in South America. There have been concerns of a resurgence of La Nina in that region, but Brazil has not seen any adverse effects, thus far. However, weather in Argentina has been dryer than normal which could impact their production. In other developments, exports are improving with inspections last week a marketing year high of 38.4 MB. However, they have a lot of catching up to do after a slow start this season and must average 50.8 MB on a weekly basis to reach USDA’s projection of 2.5 BB. With China’s economic growth slowing for the third quarter, that may be difficult to achieve.
Ending stocks of soybeans are ample at 320 MB which means the bulls may be challenged unless a weather issue arises in South America. So far, no threats are on the horizon in Brazil, but we need to keep an eye on Argentina as they are dry. With global stocks on the upswing, it is important to have strong exports. Last week, inspections were solid at 84.4 MB, a marketing year high with China taking 74 percent of shipments. However, be aware that exports tend to peak in November unless weather is threatening in Brazil. Right now, my main concern is that economic growth in China is slowing. In the third quarter, their annual growth rate was 4.9 percent versus 7.9 percent in the second quarter. Keep in mind that they are our largest customer for soybeans and the slowdown could curtail their imports. In other developments, harvest is marching along at 60 percent complete versus the average of 55 percent.
Fundamentally, wheat has the most positive outlook in the grains as stocks are shrinking. However, exports could use some improvement. Last week, inspections were a marketing year low of 5.1 MB. Since mid-August, the pace of shipments has fallen 29 percent. USDA’s projection for exports is 875 MB, and we are well behind the rate for reaching it. In other developments, winter wheat planting is in the final stretch at 70 percent complete versus the average of 71 percent.
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