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Corn faces multiple speed bumps this season from the forecast for a 3.4 million acre increase in planting intentions, potential ending stocks of 2.0 BB, declining livestock numbers, and marginal exports. While weather is always a roll of the dice, unless Mother Nature has a mishap this spring, the bulls may stay on the sidelines. Meanwhile, exports are a great concern as the U.S. is the world’s second largest exporter of corn following Brazil. Since 2020, our exports have fallen 32.6 percent. Last week, inspections were 43.2 MB and must average 49.4 MB on a weekly basis to meet USDA’s target of 1.850 BB. While the pace has improved somewhat since mid-February, we are behind in reaching their projection. It is still early in the season, but for the moment, a spark is lacking to ignite bullish interest.
Last week, the USDA injected life in the soybean market when they increased their planting intentions by only 55,000 acres which was well below expectations. Meanwhile, crosscurrents have arisen from OPEC cutting oil production, which has inflationary prospects. This puts the Federal Reserve in a predicament in that they may need to increase interest rates further to maintain their policy of a 2.0 percent inflation rate. In the meantime, exports are losing ground with inspections last week below estimates at 18.3 MB. China took 10.9 MB which was their smallest shipment in three weeks. Since early November, the overall pace of shipments has declined 72.6 percent. Putting all of this together, with Brazil on track for a record crop, and export transactions between them and China possibly being done with the Yuan rather than the dollar, traders have a lot on their plate.
Uncertainty in the Black Sea Region because of recent announcements by Cargill, Viterra, and Louis Dreyfus that they will no longer handle Russian exports has underpinned wheat. While this may lift U.S. exports, it has not happened so far. Last week, inspections were nominal at 6.1 MB and must average15.5 MB each week to reach USDA’s projection of 775 MB. If the current pace continues, they will be short of their target. In other matters, the first crop rating of the season shows 28 percent of the winter wheat crop in good-to-excellent condition compared to 30 percent a year ago.
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