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The bulls remain committed to their long-term convictions for rising corn values because of inflationary concerns, fewer planted acres, and lagging planting progress. While good progress has been made recently, planting is still behind at 49 percent complete compared to 78 percent a year ago and 67 percent for the average. Although the overall price outlook is friendly, some cracks are starting to show. One is exports. Last week, inspections were disappointing at 40.8 MB, their smallest since late January. Also, shipments to China have declined 34.7 percent since late March. The other factor is that the traditional, or trend following funds, and index funds have been scaling back their longs since early to mid-April. However, the small traders continue to pile on. Long story short, the smart money is cashing in their chips which is the sign of an advance in its mature stage.
Soybeans have been propped up from rising vegetable oil prices, strength in corn and wheat, in addition to inflationary concerns. The biggest headwind facing the market is expectations for additional acres because of the lag in corn planting and spring wheat. Soybean planting is behind as well, but it is not a big concern for the moment as it has a longer window. Last week, thirty percent of the crop was in the ground compared to 58 percent a year ago and 39 percent for the average. Looking at exports, inspections last week were 28.8 MB and above the average of 22.3 MB that must shipped each week to reach USDA’s target of 2.140 BB. However, shipments to China are declining and, at 3.0 MB last week, were the smallest since late September. Since November, the pace of shipments to them has fallen 87.7 percent. This is largely due to the decline in their economy because of the Covid lockdowns. That said, unless a weather issue develops this spring, gains in soybeans will likely be dependent upon corn and wheat.
Wheat surged early this week from the announcement that India will ban exports because of dry conditions. However, this has been rumored a while. Russia, the EU, and Argentina will likely pick up much of the slack as the USDA raised their export projections in the last report. Meanwhile, the estimate for U.S. exports was lowered 30 MB from a year ago. In other developments, spring wheat planting is dragging at 39 percent done versus 83 percent a year ago and 67 percent for the average. Minnesota is only 5 percent complete; 70 percent below their average. The winter wheat crop continues to deteriorate as conditions fell 2 points last week to 27 percent of the crop in good-to-excellent condition. While the outlook for wheat is friendly, the index funds have been liquidating longs, and the dollar is at its highest level since 2002 suggesting that caution is warranted.
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