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Look for volatility in corn to increase in the weeks ahead as traders seek answers to questions. How many acres of corn will not get planted because of the March flooding? How much grain in storage was lost? When will the U.S. and China sign a trade agreement, and how supportive will it be to corn? What will be the consequences if the border is closed with Mexico? All of these are valid concerns. In other developments, above normal rainfall is forecast through April 17th which presents a challenge for producers in getting fieldwork accomplished. Exports are improving with inspections last week at 49.5 MB, their highest since October. Currently, the funds are short 1.040 BB but have probably added to their position since last week. The question is, will they keep them with the unknowns going into the growing season?
Hope for the soybean market literally hinges upon getting a trade agreement signed with China. Negotiators are meeting this week with traders optimistic that they are close to wrapping up a deal with an announcement being made soon. However, we must not overlook the fact that South America will remain the primary supplier of soybeans to China. That is unlikely to change regardless of an agreement. Unless Mother Nature intervenes, the reality is that China holds most of the cards. Looking at exports, inspections were modest at 26.8 MB with China taking only 9.7 MB. Over the past 12 weeks, shipments to them have averaged 13.0 MB per week. As mentioned in previous comments, prior to the tariffs, they were taking 15-30 MB on a weekly basis. Meanwhile, the flooding last month means that corn acres unable to get planted will most likely go to soybeans. This does not offer much encouragement considering global stocks are already at a record level. Looking at the funds, they are short 435 MB which is a moderate position.
With the USDA increasing their stocks estimate in wheat to 1.591 BB, a greater improvement in exports is needed. However, they continue to lag. Inspections last week were a modest 15.7 MB and below the average needed to reach USDA’s projection of 965 MB. Chances are they will lower their estimate in the supply-demand report next week. Last week, 56 percent of the wheat crop was rated in good-to-excellent condition compared to 32 percent a year ago. This compares to the high set in 2012 at 58 percent in good-to-excellent condition. Right now, the factor supporting wheat is acreage lost in Nebraska and adjacent states because of flooding. Meanwhile, above normal moisture is forecast for April which could lead to additional losses. Currently, the funds are short 535 MB which is moderate, but borders on being large.
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