On The Money Grain Commentary 12-23-20

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Corn Outlook:

The bullish news in corn may be close to being baked into values. Expectations are that China will purchase 22-30 million tons, but that has been circulating in the news for the past few weeks. South America has been dry but recently received moderate showers. In the meantime, the wave pattern of the dollar shows that it is on the cusp of forging a major low, possibly by year end. When it happens, a 5-7 percent recovery is expected which could crimp exports. Furthermore, the wave pattern of crude oil shows that it could be topping soon. Meanwhile, the funds still hold a lofty position of 1.395 BB. Eventually, these issues will clash. Last week, export inspections were mundane at 30.0 MB and must average 59.6 MB each week to reach USDA’s target of 2.650 BB. The pace of shipments saw its first downtick since mid-November.

Bean Outlook:

No one seems to have any fear of being long soybeans. This means you probably should as a peak usually occurs when least expected. Just about every story you read is bullish which suggests that sentiment has reached an extreme. While it has been dry in South America, showers have occurred recently. Looking at exports, inspections last week were the second highest of the season at 93.0 MB with China taking 47.5 percent of shipments. This was the smallest percentage taken by them for the marketing year. While the overall pace of shipments improved 6.0 percent last week, it is deceptive as the increase came from purchases by Bangladesh, Japan, and Pakistan. Meanwhile, shipments to China peaked in early November and have since fallen nearly 12.0 percent. The decline in purchases from our number one customer should be raising yellow flags for the bulls, but it has not resonated yet.

Wheat Outlook:

Wheat is mostly a follower of corn and soybeans since the crop has gone into dormancy. Support is being derived from Russia lowering their export targets. Meanwhile, last week’s export inspections were nominal at 14.3 MB and must average 20.2 MB on a weekly basis to reach USDA’s target of 985 MB.

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