On The Money Grain Commentary 3-23-23

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Corn Outlook:

A lot is going on in the grains as Russia has renewed its agreement with Ukraine to allow shipments go interrupted from the Black Sea Region, which could dampen U.S. exports. However, a bigger problem is the blow up in the global banking system caused by a decade long environment of zero percent interest rates. With rates now rising, it has devalued bank bond portfolios, and could put many on the chopping block. It will also make lending tighter. With inflation at 6 percent, the Fed is backed into a corner. Meanwhile, in corn, exports saw a reprieve last week with inspections a marketing year high of 46.7 MB. However, they must average 48.3 MB every week to reach USDA’s target of 1.850 BB, which is a long shot. Furthermore, livestock numbers are declining, and feed consumption is down. The bottom line in corn is that if acres increase as expected and we have a normal growing season, stocks this fall could be excessive.

Bean Outlook:

Soybeans are meeting a headwind from Brazil’s harvest progressing at 62 percent complete along with expectations for a record crop. Although Argentina is forecast to have a short crop, it is old news. Meanwhile, export inspections last week were up slightly at 26.3 MB with China taking 14.9 MB. However, deliveries to them have fallen 84 percent since the first week of November, while the overall pace of shipments has declined 74 percent. That said, long-term gains in soybeans will be difficult to achieve unless export competition with Brazil lessens. Meanwhile, that is unlikely to happen as U.S. relations with China is deteriorating and becoming more intense.

Wheat Outlook:

Recent temperatures in the low twenties and upper teens in portions of the Midwest may have damaged the wheat crop. However, this is being overshadowed by the renewal of the agreement between Russia and Ukraine for the uninterrupted flow of grain from the Black Sea Region, in addition to the sell-off in soybeans. Meanwhile, in other matters, export inspections last week were slightly higher at 13.7 MB but below the average of 14.7 MB that must be shipped on a weekly basis to reach USDA’s projection of 775 MB. Over the past three weeks, the pace has declined.

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