On The Money Grain Commentary 1-5-17

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Corn Outlook:

The grains rang in 2017, but have little to put on their plate until the January 12th Crop Report. In the meantime, equities posted gains on expectations of a better economy this year. As I mentioned in a Dow Jones report last month, confidence is soaring, but a major top in stocks is likely in March or May. Meanwhile, corn has found support recently on expectations that the index funds will increase their longs when they rebalance their position next week. Export inspections were anemic at 20.0 MB, and below the average needed to reach USDA’s target of 2.225 BB. Last week, the funds increased their shorts 105 MB to 555 MB, their largest position since October. After the crop report, the focus will be upon planting intentions and spring weather.

Bean Outlook:

Weather is improving in Brazil, but there are some dry spots in the north. In the meantime, excessive rain in Argentina over the holidays caused flooding in some areas. However, a record crop in South America is still on tap. Exports continue to slip with inspections last week at 58.0 MB. This was the seventh straight week that they have declined. Since peaking in November, the pace has fallen 37 percent. As mentioned in previous reports, the average decline into the end of the marketing year is 83 percent. Looking at the funds, their long position fell 30 MB last week to 505 MB, which was their fourth consecutive week of liquidation. Once the January 12th Crop Report passes, attention will turn to planting intentions. While some are expecting a 5-million-acre increase in soybeans, it would not be a surprise to see them jump 6-7 million.

Wheat Outlook:

Support has emerged in wheat from expectations that the index funds will increase their longs when they rebalance their position next week. This has led to ideas that the trend following funds may be forced to cover some of their shorts. The strength Wednesday and Thursday deems that this probably the case. Last week, the funds trimmed their short position 25 MB to 625 MB and will probably lighten it more. Looking at exports, inspections were 14.5 MB, and below the average needed to reach USDA’s projection of 975 MB.

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