On The Money Grain Commentary 5-9-19

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Corn Outlook:

Trade negotiations between the U.S. and China have had more cliff hangers and drama than a tv soap opera. Since their beginning, they have run hot and cold, having cooled recently because of President Trump’s threat to increase tariffs on Chinese goods. While weather lends a positive tone to corn, it is overshadowed by the uncertainty surrounding the trade talks. Currently, only 25 percent of the crop is planted compared to the average of 46 percent. The forecast for the next couple of weeks shows that progress will remain slow. The states that stick out like a sore thumb are Illinois, Indiana, and Minnesota as they are 56 percent, 32 percent, and 36 percent behind their average. With the funds short a near record 1.585 BB, the corn market could get interesting. Looking at exports, inspections last week were below estimates at 38.4 MB.

Bean Outlook:

Soybeans have suffered steep losses since mid-April from the lack of a trade agreement with China. However, this is only part of the issue. Another uncertainty is the impact that African Swine Fever will have on demand. Brazil has announced that because of the outbreak, exports to China will fall 2.0 million tons. As a result of African Swine Fever and the rift in trade talks, U.S. exports are diminished. Last week, inspections were below estimates at 22.0 MB and are on track for 1.485 BB versus USDA’s projection of 1.875 BB. While the fundamentals of soybeans are decidedly bearish, the market has already absorbed a great deal of negative news as the short position of the funds stands at a record 805 MB. This is not to say it will not get larger. However, it is best to look over your shoulder when extremes are reached. Looking at planting progress, it is off to a slow start at 6 percent done compared to the average of 14 percent.

Wheat Outlook:

The wheat crop remains exceptional with 64 percent reported in good-to-excellent condition for the second consecutive week. This compares to a rating of 34 percent a year ago and 47 percent for the 10-year average. Meanwhile, spring wheat planting continues to lag at 22 percent complete versus the average of 49 percent. South Dakota is struggling the most at 57 percent below its average. Exports continue to be an issue with inspections last week a modest 17.5 MB. Looking at the funds, they have increased their short position to 590 MB. While this is a large position, it is not as glaring as the one in corn and soybeans.

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