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Corn futures came out swinging following the long Memorial Day Weekend from concerns of frost damage during last week’s cold snap in the northern sections of the Midwest, as well as a hot forecast for the next 2 weeks. Expectations of continued strong export demand from China also supported. Last week, inspections were the third highest of the season at 80.6 MB with China taking 51.5 percent of shipments. However, the cumulative pace of shipments has fallen 2 consecutive weeks which may be a sign they are peaking. In the first rating of the season, the USDA pegs 76 percent of the corn crop in good-to-excellent condition versus 74 percent a year ago. Right now, the most troubling issue I see in commodities is that many investment advisors are recommending their clients to reduce their typical portfolio weighting of 60 percent stocks and 40 percent bonds and increase their exposure to commodities as a hedge against inflation. This usually happens when the smart money is already on board and the game almost over!
Export demand has deteriorated in soybeans, but the market continues to be underpinned from tight stocks and concerns of additional tightness if weather does not cooperate this summer. Currently, the forecast through mid-June is for above normal temperatures and mostly normal precipitation except for the western sections which are expected to see below normal rainfall. However, traders are always hypersensitive to forecasts during the growing season. Meanwhile, export inspections last week were horrendous at 7.0 MB with China barely visible. In other developments, planting is chugging along at 84 percent complete compared to 67 percent for the average. Furthermore, we are well ahead in development with 62 percent of the crop having emerged versus the average of 42 percent.
Wheat is mostly following corn but has also found support recently from dry conditions in the Upper Plains. Looking at exports, inspections last week were a paltry 9.4 MB. In other developments, the rating for winter wheat rose one-point to 48 percent of the crop in good-to-excellent condition and compares to a rating of 51 percent a year ago. Meanwhile, the rating for spring wheat slipped 2-points last week to 43 percent of the crop in good-to-excellent condition and is considerably less than last year’s rating of 80 percent.
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