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The problem with weather markets is that they tend to be short-lived, and when they are done, demand becomes the driving force. In the case for corn, demand is struggling as usage is down 8 percent from a year ago, and exports 30 percent. Last week, inspections were 34.5 MB, the lowest since the first week of April. This is well below the average of 42.3 MB that must be shipped each week to reach USDA’s target of 1.725 BB. What is disturbing is that the pace of shipments has been rising since mid-February but is beginning to back off. Meanwhile, bullish interest may stay with us a bit longer as the crop rating fell 6 points last week to 55 percent in good-to-excellent condition. The million-dollar question is, even with a reduced yield, can slack demand support present values?
The bulls are emotionally charged on weather in soybeans, which may continue a while longer as the crop rating last week fell 5 points to 54 percent in good-to-excellent condition. For the past several weeks, weather has overshadowed demand which is far from winning any ribbons. Be aware that usage is down nearly 3 percent from a year ago while exports have fallen 7 percent. In addition, record exports are expected out of Brazil, and China has not taken a shipment from the U.S. exceeding 1.0 MB since early May. Last week, inspections were only 6.8 MB and well below the average of 18.0 MB that must be shipped weekly to reach USDA’s projection of 2.0 BB. Currently, shipments are running 120 MB below the pace needed. The bottom line is that when the exuberance regarding weather runs its course, will current demand support prices?
Wheat is being largely supported from strength in corn and soybeans but is also underpinned from threats by Russia to pull out of the Black Sea Region grain agreement. Should it happen, it would be supportive to U.S. exports but, so far, they are off to a slow start for the marketing year with inspections last week of only 8.7 MB. Meanwhile, winter wheat harvest is getting into full swing and is running behind last year’s pace of 23 percent complete and the average of 20 percent.
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