On The Money Grain Commentary

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Corn Outlook:

The long wait is almost over as enthusiasm surrounds the proposed signing of the Phase I trade deal with China on January 15th in which corn is expected to be a beneficiary. While the agreement calls for China to purchase $40 bln of ag products annually, we do not know the breakdown of commodities. Corn can use all the help it can get as usage is down 4.0 percent from a year ago while exports are projected to fall 10 percent. However, shipments this season, so far, are running 53 percent below a year ago. Inspections last week were a modest 21.6 MB and must average 44.5 MB each week to achieve USDA’s projection of 1.850 BB. While there has been an uptick in exports the past few weeks, they need to catch on fire to bring the bulls back.

Bean Outlook:

Exuberance abounds that after a trade deal is signed with China, soybean exports will see a big surge. However, that remains to be seen as purchases from them have been on the downswing since late November. In the meantime, harvest is just a few weeks away for early maturing soybeans in Brazil. Is China willing to give Brazil the boot in favor of the U.S. considering the history of tensions between the two? The bottom line is that we are still looking at a bird in the bush rather than one in the hand because details of the agreement are still unknown. While traders are optimistic, they will be disappointed if the deal does not live up to expectations.

Wheat Outlook:

Expectations have grown that wheat could be a beneficiary in the Phase I trade agreement with China. It certainly could use the help as global stocks are near a record level. While exports have risen nearly 21 percent since early December, they are still not very impressive. Inspections last week were nominal at 12.6 MB and below the average of 20.4 MB needed on a weekly basis to reach USDA’s target of 975 MB. Right now, we are on track for shipping 880-897 MB. In other developments, close tabs are being kept on recent tensions in the Middle East as Iraq is a large customer of U.S. wheat.

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