On The Money Grain Commentary 12-17-20

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Corn Outlook:

Traders continue to have high hopes that China will import large quantities of corn from the U.S., possibly 22-30 million tons. Last week, the USDA raised China’s import estimate 3.5 million tons to 16.5 million. The dollar has been trending lower since March making U.S. grains cheaper. What may be sneaking up on the bulls is that the wave pattern of the greenback shows that it is probably not far from forging a major low. When one occurs, it could recover 5-7 percent or more in value which may crimp China’s imports causing them to fall short of expectations. Last week, export inspections were nominal at 34.9 MB and must average 58.9 MB each week to reach USDA’s projection of 2.650 BB. While the pace of shipments has improved 16 percent since mid-November, exports will face a headwind if the dollar recovers.

Bean Outlook:

Conditions are improving in Brazil, but traders still have concerns and remain bullish. Soybean exports, South America’s weather, and China will continue to dominate the news going into 2021. Export inspections were not as brisk as the previous week at 87.0 MB but stood strong with the pace of shipments rising for the first time since mid-November. China took 57.0 MB of last week’s shipments, or 65 percent of the total. However, as mentioned in a previous comment, some cracks are emerging. In early November, shipments to China peaked and have since fallen 7.7 percent. Reports have circulated that China is already booking Brazilian soybeans for March delivery. Other customers picked up the slack during the past 3 weeks because of the weaker dollar. However, if the dollar bottoms, their interest will diminish.

Wheat Outlook:

Wheat ran into a wall early this week because of moisture received in the Plains. Meanwhile, support is expected from Russia’s intentions to levy an export tax which could swing business to the U.S. However, short-term, they will remain competitive for another month. Looking at export inspections, they were anemic at 9.5 MB, the second lowest of the marketing year. They must average 20.0 MB each week to reach USDA’s projection of 985 MB.

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