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The fundamentals of corn are friendly, but largely being ignored. Global stockpiles are shrinking, down 11.5 percent from a year ago; U.S. exports are 6.0 percent above their 5-year average; President Trump recently said that China will buy a lot of U.S. corn; plus, field work in many areas of the Southeast and Midwest is being delayed because of excessive wet conditions. In most cases, the corn market would be off to the races on these factors. However, the issue keeping the bulls from stepping up to the plate is the fact that a trade deal with China has not yet been set in stone. Keep in mind that there are a lot of moving parts putting a deal of this magnitude together and traders are impatient. Meanwhile, looking at exports, inspections last week were disappointing at 29.5 MB and below the average needed to reach USDA’s projection of 2.450 BB.
Optimism has run hot and cold for inking a trade agreement with China to buy more U.S. soybeans. Since early January, nearly 98 MB of soybeans have been inspected for shipment to China, or an average of 14 MB per week. This is still below the average of 15-30 MB that were shipped each week prior to the tariffs. The question remains whether these are goodwill purchases that end once an agreement is reached. While a trade deal is on everyone’s radar, we must not overlook the fact that U.S. and global stocks are a record, exports are 34 percent less than a year ago, and 27 percent below their 5-year average. While planted acres are expected to fall 4.2 million from last year, more acres may be switched from corn because of excessive wet conditions in the Southeast and portions of the Midwest. This does not paint a pretty picture for a sustained upward move. In other developments, inspections last week were a marketing year high of 48.0 MB, but this was because of recent purchases by China.
Wheat has fallen into a bottomless pit even though U.S. and global stocks are shrinking. The problem is lagging exports. Cumulative shipments are running 8.0 percent less than a year ago and 15 percent below the 5-year average. Last week, inspections were 25.4 MB but below the average of 28.2 MB that must be shipped each week to reach USDA’s projection of 1.0 BB. Currently, they are on track for 868 MB. While traders are comfortable being short now, the crop will emerge from dormancy in a few weeks and susceptible to swings in the weather.
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