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Corn harvest is winding down at 87 percent complete with the focus now turning to weather in South America, exports, and developments in the Ukraine-Russia conflict. Growing conditions are favorable in Brazil, but dry in Argentina. However, no alarms are sounding just yet. In other matters, all that you can say about exports is they stink. This is because of the strong dollar. Last week, export inspections were a marketing year low of 9.1 MB. Meanwhile, the pace of shipments is running 33.5 percent below the 5-year average. Unless the dollar takes a sharp hit, this is unlikely to change. With inflation at a 41-year high, speculative interest in the grains should be soaring. However, since April, the longs in corn held by the index funds has fallen 26 percent. That said, it will probably take a weather event in South America to spark bullish interest.
Soybeans have seen robust export sales the past few weeks, especially to China. Last week’s inspections were dynamic with China taking 67.6 MB. Because of the recent increase in activity, the pace of shipments is running 26.7 percent above its 5-year average. However, be aware that sales to China usually remain strong until the status of Brazil’s crop is known. As of last week, Brazil’s crop was 57 percent planted under mostly favorable conditions. That said, China’s interest in U.S. soybeans may not last much longer. Usually, it peaks in November. When it does, exports decline, on average, 65-85 percent through the end of the marketing year. Unless adverse conditions develop in South America, this is unlikely to change. Meanwhile, although inflationary forces are at play in the economy, the longs of large institutional investors, or index funds, in soybeans have fallen 45 percent since April. The market needs their participation to sustain a long-term advance.
The rating for the winter wheat crop rose 2 points last week to 30 percent in good-to-excellent condition. This is the poorest rating since 2012. Normally, this would send the market soaring. However, that is not happening largely because of listless exports caused by the strong dollar. Inspections last week were a meager 6.6 MB. In the meantime, the current pace of shipments is running 43.3 percent below its 5-year average. Like corn and soybeans, even though inflation is on the rampage, the index funds are not participating in wheat as their longs have declined 36 percent since April.
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