January 29 - Wall Street was cautious today ahead of this week's policy decision from the Federal Reserve, and while traders monitor developments in both China and in the Middle East. The only notable U.S. economic data out today was the Dallas Fed manufacturing index, which came in at -27.4, down from -10.4 the previous month, showing continued headwinds for the manufacturing sector. The VIX is trading near 14 at midday, while the dollar index is trading near 103.7. Yields on 10-year Treasuries are trading near 4.09%, while yields on 2-year Treasuries are trading near 4.33%. Crude oil prices remain down by more than 1.5% amid the headwinds coming from the failure of China's Evergrande Group, while similar headwinds are pressuring the grain and oilseed markets. This morning's USDA export inspection report held little fresh fodder to turn sentiment in the grain and oilseed sector, with demand seen as soft overall - at least not strong enough to justify higher prices considering ample supplies to meet that demand. Soymeal managed to find some bargain buying after making a new low for the move, with Argentine crushers still seeing low volumes ahead of harvest. The protein sector was also able to firm into positive territory on strengthening fundamentals, albeit the gains were modest at midday.
USDA inspected 35.5 million bushels of corn for export shipment in the week ending January 25, along with 32.7 million bushels of soybeans (as shown below), 9.7 million bushels of wheat, and 2.5 million bushels of grain sorghum. The portion of the above that was specifically inspected for shipment to China included 2.9 million bushels of corn, 17.9 million bushels of soybeans, 0.04 million bushels of wheat, and 2.5 million bushels of grain sorghum. Grain sorghum shipments to all destinations year-to-date exceed the seasonal pace needed to hit USDA's target by 33 million bushels, while marketing year to date wheat export inspections fall short of the pace by 54 million bushels. Donations do not need to be inspected, so an active donation program may narrow that wheat deficit a bit.
The most disappointing of the four this year is soybeans, where Brazil shipments continued through our traditional peak shipment season, stealing market share away this year. USDA marketing year to date soybean export inspections for shipments to all destinations total 1.017 billion bushels, down 314 million or 24% from the previous year's pace. The year-to-date inspection total falls short of the seasonal pace needed to hit USDA's target by 68 million bushels, and the deficit continues to rapidly climb. As such, I don't see how USDA avoids reducing the export target by up to 50 million bushels in one of the next two WASDE crop reports. I do think that it will increase its crush target at some point, but not by enough to offset the current export deficit. It's a different story for corn, where cheap prices have created more demand. Marketing year to date export inspections to all destinations total 616 million bushels, up 141 million bushels or 30% from the previous year's pace. Year-to-date inspections exceed the seasonal pace needed to hit USDA's target by 18 million bushels, although that seasonal pace starts ratcheting up pretty quickly over the next couple of months as we go through our peak shipment period ahead of the Argentine harvest.
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