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News out of Washington early this week was that the summit meeting between President Trump and Xi of China might be pushed back to June rather than the scheduled meeting in April. However, the trade negotiations have been beaten to death and are becoming old news. Right now, traders are focused more on the Planting Intentions Report later this month and wet conditions in the Midwest delaying fieldwork. Flooding is a problem in many areas, especially Nebraska. In other developments, corn exports were lackluster with inspections of 31.3 MB and below the average needed to reach USDA’s projection of 2.375 BB. Looking at the funds, they are short 1.295 BB, their largest position since December 2017. However, 350 MB, or nearly one-third of their position is underwater. When that happened in 2017, there was a price recovery of 19 percent.
Traders continue to flip flop between optimism for restoring a normal export relationship with China and the reality that global soybean stocks are a record and may grow further. The Planting Intentions Report on March 29th could knock them off the fence as it might pave the way for ending stocks approaching 1.0 BB. Looking at exports, inspections last week were 30.9 MB and below the average needed to reach USDA’s target of 1.875 BB. China took 9.8 MB. For the past 10 weeks, they have received an average of 13.4 MB per week which was less than the minimum of 15 MB they took prior to the tariffs. Currently, the funds are short 585 MB of soybeans, their largest position since September. This suggests that there may be some short covering ahead of the intentions report later this month.
Wheat has strengthened, mostly because its relationship to corn became too narrow. At one point, it was only an 18 percent premium and has since widened to 22 percent. Meanwhile, exports remain a thorn in wheat’s side as inspections last week were a modest 12.2 MB, their lowest since November. If the current pace continues, we will ship 870 MB compared to USDA’s estimate of 965 MB. The factor that wheat has in its favor is the funds are short 540 MB and starting to cover.
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