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Corn Outlook:
The grains have a few items on their plate. One is rising concerns of dryness in southern Brazil and Argentina. The other is how extensive will President Trump’s agenda be regarding tariffs now that he is in office. On his first day, a 25 percent tariff was proposed to take effect February 1st on imports from Mexico and Canada. In addition, he is considering at 10 percent tariff on imports from China and the EU. Meanwhile, looking at corn, exports have improved during the past few weeks. Inspections last week of 60.2 MB were a marketing year high for the second consecutive week. However, to meet USDA’s target of 2.450 BB, they must average 52.8 MB each week for the remainder of the marketing year, which may be a high mark to achieve considering the strength of the dollar. Right now, the biggest concern for corn is that the long position of the traditional funds has risen to 695 MB, while the longs of the index funds have reached 2.160 BB. This is a 3-year high for both groups that is becoming overextended.
Bean Outlook
Soybeans are finding support from the rally in corn and weather concerns in Argentina. However, we must remember that Brazil is on track to produce a record crop, plus the prospect exists for record global stocks. Meanwhile, exports continue to deteriorate. Last week, inspections fell below the previous week to 35.7 MB with China taking 18.1 MB. For ten consecutive weeks, the overall pace of shipments has fallen, and is down 44 percent since mid-November. Furthermore, deliveries to China have declined 60 percent during the same period. The bottom line for soybeans is that with exports falling, current price levels may be difficult to sustain.
Wheat Outlook:
There is not a lot to say about wheat, nor does it seem to have a great deal of interest. The funds are sporting a short position of 485 MB and have not seen a threat causing them to cover up to this point. Meanwhile, exports are lagging. Inspections last week were 9.6 MB and below the average of 19.0 MB that must be shipped weekly to meet USDA’s target of 850 MB. Currently, we are on pace for shipments of 715 MB. The bottom line is that with fundamental news lacking, wheat will likely follow the direction of corn.
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