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Corn is in a tug of war, pulled between surplus stocks of slightly over 2.0 BB, and producers in a quandary with Mother Nature trying to get the crop planted. Wet conditions are forecast for the next couple of weeks which will limit progress. However, the trade does not seem to be focused on weather, for the moment, but rather supply. Currently, the funds are short a record 1.350 BB which could lead to a spike in volatility should weather become a greater issue. In 2016, when they were short a similar position, new crop corn surged 23 percent over a 9-week period when they covered. While there is no assurance that will happen this time, the catalyst is present. In other developments, export inspections fell from the previous week to 40.7 MB.
Hope springs eternal. Traders remain optimistic that once a trade agreement is signed with China, soybean exports will return to normal. However, too much water has probably gone under the bridge for it to happen. One reason is that tensions sometimes rise between the U.S. and China, and they do not want to rely upon the U.S. as their primary source for soybeans. Last week, export inspections were 32.6 MB in which China took 14.1 MB. For the past 13 weeks, they have taken an average of 13.1 MB which is below the minimum shipment of 15.0 MB that they received weekly prior to the tariffs. Long story short, soybeans could be facing an uphill struggle unless weather intervenes during the growing season. Obstacles facing the market are an oversupply of inventory, and the probability that planted acres will exceed USDA’s projection of 84.6 million because of spring flooding and delayed corn planting.
Wheat futures continue to struggle even though planted acres are at an historic low. The primary reason is that exports are lagging. Last week, inspections were a modest 19.7 MB. Meanwhile, another factor is favorable crop conditions. The crop rating jumped 4 points last week to 60 percent in good-to-excellent condition. This compares to the 10-year average of 46 percent. The major winter wheat producing states saw an improvement of 3-7 percent. However, that may change next week because of expected flooding along the Missouri and upper Mississippi Rivers.
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