Morning Grain Market Research

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The grains came under pressure once again overnight with corn dipping to the lowest point in a week and wheat the lowest in six weeks. The go-to rationale for the pressure is an improved short-term weather outlook which is more palatable for many than to say we had run out of fresh bullish news or just about any fresh news for the matter. In light of what we know currently about the production issues this year, we pretty well factored that into the current price structure and are in a period of re-balancing. A portion of that involves unwinding of long-grain/short bean positions. To move out of these existing ranges will require something new.

News, as limited as it may be, from the trade war front does sound mildly encouraging. Reportedly negotiators from the U.S. and China have been conversing by phone, which is an improvement from not conversing at all. I suspect the trade, having been disappointed time and again after hearing a deal is almost made, only to have it squashed, has led us to the point of trade news fatigue and it will be difficult to develop any excitement until an actual agreement is inked.

Economists expect the 2nd quarter GDP in China to have grown at 6.2%, which is down from 6.4% in the 1st quarter, and this in spite of measures the government has taken to bolster their economy. This would be the slowest growth in nearly 30 years, and most attribute ongoing trade war as a significant drag on their economy. We need to go back only a little over a decade to find where the Chinese economy was growing by double-digit percentages, which makes the current number look worrisome but also keep in mind that in U.S. Dollars, their overall economy is nearly three times larger than a decade ago. 6.2% growth of a $14 billion GDP generates near double the amount of revenue than does a $4.6 billion GDP at 10%.

The minutes of the recent FOMC meeting will be released today, and Chairman Powell is also scheduled to begin two days of semi annual testimony in front of Congress concerning monetary policy and the overall state of the economy. You can expect to hear the standard comments about steady and controlled growth of the U.S. economy, which by the way set a record last week of the longest period of growth, 121 months, without a recession but tempered with warnings about the state of the global economy. Do note that since the Fed elected to keep rates unchanged last week, the U.S. Dollar has marched higher each day. While many economists as well as markets, do expect the Fed to cut rates by 25 basis points at the end of the month, they will be paying very close attention to the comments for a hint to any change in the outlook.

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