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Corn is finding strength from these factors: uncertainty regarding spring weather, inflation, the Biden Administration’s decision to allow E-15 ethanol sales this summer, and the supply disruption in the Black Sea Region. With the long position of the index funds, or institutional investors, having reached 2.470 BB, the highest since September 2010, it reveals that the greatest worry of large traders is inflation. Currently, it is at 8.5 percent, the highest since 1981. So far, exports have not been affected by inflationary pressure, as inspections last week were strong at 55.8 MB. China took 34 percent of shipments, but the pace to them saw a downtick. Keep in mind that in their last report, USDA reduced China’s imports 3.0 million tons. Be aware that while the outlook for corn looks bullish, when the index funds built a long position of this magnitude in 2010, once they began liquidating, prices plummeted 64 percent.
The outlook for record acres of soybeans being planted this spring, and the USDA lowering China’s imports 3.0 million tons does not bode well for higher values. However, this is currently being overshadowed by the strength in corn and the prospect of higher inflation. The reduction in China’s imports comes as no surprise, as the pace of shipments to them has fallen 80.5 percent since November. Meanwhile, looking at inspections last week, they held their own at 28.1 MB and must average 22.0 MB on a weekly basis to reach USDA’s forecast of 2.115 BB. Be aware that with the Covid lockdown in China, this pace may be difficult to maintain.
Wheat continues to be underpinned from the prospect of diminished exports from the Black Sea Region, and poor growing conditions for winter wheat. Although crop conditions improved 2 points last week to 32 percent in good-to-excellent condition, the rating is well below the 10-year average of 49 percent. Looking at exports, inspections last week improved slightly at 15.1 MB, but were below the average of 19.6 MB that must be shipped on a weekly basis to reach USDA’s projection of 785 MB.
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