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The dark cloud hanging over the corn market will take time to go away. Even though global stocks-to-usage has declined for the second straight year, and harvest is creeping along at 28 percent complete compared to 47 percent for the average, the bulls are reluctant to step up to the plate. This is largely because ending stocks are at a 20-year high and exports are struggling. Last week, export inspections were a marketing year low of 12.7 MB and need to average 36.8 MB each week to reach USDA’s target of 1.850 BB. While the lag may not be a big concern at the moment, it will not take long to get behind the “eight ball.” Looking at the funds, they have increased the short position 100 MB to 955 MB. This is their largest position since early June.
There has been a lot of chatter in the trade circles the past few weeks of increased odds for a La Nina event affecting soybean production in South America. This supported the market last week, but the stories seem to have run their course for now. Harvest is behind schedule at 49 percent complete versus the average of 60 percent, but should pick up as drier weather is forecast. Exports continue to sizzle and were a marketing year high of 65.0 MB. China took 43.0 MB, which is a marketing year high for them. However, if history follows its normal course, exports to China will peak next month. Looking at the funds, they liquidated 35 MB of their short position last week reducing it to 45 MB.
Wheat has shown a few signs of life recently, but do not look for it to go very far very fast. This is mostly because world stocks have risen for 5 straight years and are at a record level. Meanwhile, exports are less than thrilling with inspections last week the second lowest of the season at 11.8 MB. Winter wheat planting is not winning any races at 60 percent done versus the average of 71 percent. However, the pace should improve with drier weather in the forecast. Looking at the funds, they increased their shorts 25 MB to 455 MB following several weeks of liquidation.
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