On The Money Grain Commentary 2-22-24

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Corn Outlook:

Corn faces a strong headwind, especially if USDA’s ending stocks forecast of 2.532 BB in the Ag Outlook Forum comes to realization. This would be the largest ending stocks in over 20 years. While this gives the bears the upper hand, pessimism is at an extreme as the short position of the funds has risen to 1.610 BB, the highest since 2020. Meanwhile, the long position of end users is 325 MB, its highest since 2005. When extremes, such as these are seen, it often leads to a recovery. Looking at exports, inspections last week were 36.1 MB and below the average of 49.5 MB that must be shipped weekly to reach USDA’s projection of 2.1 BB. So far this season, there has not been a shipment this large suggesting that it will be a challenge to meet their target. Bottom line, the fundamentals are bearish, but the extreme opposite position between the funds and end users needs to be respected.

Bean Outlook

The bulls do not have much incentive in soybeans, especially if USDA’s forecast of ending stocks at 435 MB comes to fruition. If realized, it would be the largest ending stocks since 2019. Meanwhile, the funds are short 810 MB while end users are long 265 MB. While this may not be as extreme of a situation as in corn, the market is subject to a recovery. In other matters, export inspections last week were below the previous week at 43.5 MB with China taking 24.1 MB. Since mid-January, the overall pace of shipments has been rising, but there was a down tick for those to China last week. Shipments to them peaked in November and have since fallen 57 percent. The bottom line in soybeans is that with the outlook for an increase in planted acres this spring, and larger ending stocks, a weather event will likely be needed at some point during the growing season for a major recovery to occur.

Wheat Outlook:

Wheat showed signs of a bottom this week but faces a headwind from the USDA raising their ending stocks estimate in the Ag Outlook Forum to 769 MB. Also, the U.S. exports will continue to meet intense competition in the global market from Russia, Ukraine, Australia, and Argentina. Last week, inspections were 13.9 MB and below the average of 18.7 MB that must be shipped weekly to meet USDA’s target of 725 MB. So far, this marketing year, there has not been a shipment that high. That said, values may remain under pressure until the crop emerges from dormancy and weather becomes more of a factor.

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