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Corn Outlook:
The military strikes by the U.S. against Iran has sent ripples throughout the grain and financial markets. Crude oil has rallied from the closure of the Strait of Hormuz as 20 percent of the global oil is transported through that region. This is stoking fears of inflation. Meanwhile, the flock to the dollar makes grain exports more expensive, creating a catch 22 situation. So far, there has been little impact to corn exports, but inspections last week were below the previous week at 73.1 MB. However, this is above the average of 66.9 MB that must be shipped weekly to meet USDA’s target of 3.3 BB. The bottom line is that if the dollar continues to strengthen, the export pace could weaken and add to ending stocks that are already massive at 2.1 BB.
Bean Outlook
The military action against Iran may put a target on the summit in April between President Trump and Xi of China. China’s largest supplier of oil is Iran as they purchase 80 percent of Iran’s production. If there is a disruption of shipments from them to China, it could jeopardize the meeting happening. This would be a huge blow to the bulls as the funds are holding their largest long soybean position in over 3 years. However, the market’s resilience this week indicates they are not deterred. Meanwhile, exports were better than expected last week with inspections of 41.7 MB and China taking 26.9 MB. However, the pace of shipments to them has dropped since mid-February. The bottom line is the bulls have bet the farm on China buying more U.S. soybeans even though Brazil is a much cheaper source. Considering the extent of the fund long position, there is no room for disappointment.
Wheat Outlook:
Wheat has been coat tailing the rally in soybeans but can be expected to meet resistance from the strengthening dollar. Meanwhile, support may develop when the crop emerges from dormancy and weather becomes a greater factor. Looking at exports, inspections backed off from the previous week at 12.6 MB. This was below the average of 16.6 MB that must be shipped weekly to meet USDA’s target of 900 MB. However, we are still on track for it to be met.
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