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Corn has not been getting many looks as the trade’s focus has been on soybeans and whether China will step up their purchases. However, that may soon change. Global corn stocks are down 11.5 percent from a year ago while stocks-to-usage have declined for the second consecutive year. Wet conditions are forecast in the Midwest through mid-month which will keep fieldwork at a crawl. In addition, the summit meeting between the U.S. and China scheduled March 27th is anxiously awaited for news of a trade agreement. While everyone is looking at soybeans, corn may be the one that comes out on top. In other developments, export inspections last week were 34.0 MB and below the average needed to be shipped each week to reach USDA’s target of 2.450 BB.
All eyes will be on the March 27th summit meeting with China hoping a trade deal will be struck for additional soybean purchases. While it may happen, we must face the reality that China has been increasing their reliance on Brazil the past few years for the bulk of their needs. The reason is obvious. Tensions between the U.S. and China are known to escalate at times, and they do not want to be dependent upon the U.S. as their primary source for soybeans in the event of a conflict. Another factor that may limit China’s interest is their pork production is expected to be down 20-30 percent which will likely impact their demand. Looking at exports, inspections last week were 31.0 MB and below the average needed to reach USDA’s target of 1.875 BB. China took 12.4 MB. During the past 8 weeks, they have taken 110.3 MB. That is an average of 13.7 MB per week which is below the average of 15-30 MB shipped to them each week prior to the tariffs.
U.S. wheat is cheap enough to compete in the global market but needs a spark to get the bears attention. Currently, the funds are short 475 MB, their largest position since February 2018. This should make the bears nervous. Wheat is holding only a 19 percent premium to corn which should eventually offer support. However, lagging exports continue to act as a drag. Inspections last week were 16.1 MB and below the average of 28.9 MB that must be shipped each week to reach USDA’s projection of 1.0 BB. The EU’s wheat crop is forecast to be 9.4 percent above a year ago while their exports are projected to rise 41.0 percent. Long story short, the U.S. will continue to have plenty of competition.
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