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Strength in corn recently is more about the funds covering short positions rather than improving fundamentals. With U.S. ending stocks the highest in 22 years and global stocks at a 30-year high, there are few reasons to get excited. The fundamental factor supporting corn is that exports are running 79 percent above a year ago. However, the pace is starting to slow down as shipments have fallen 11 percent in just the past two weeks. Inspections last week were 34.4 MB and below the average needed to reach USDA’s target of 2.225 BB. As I mentioned, the primary influence behind corn’s strength has been fund short covering. A couple of weeks ago, they were short 955 MB, but have since reduced their position to 670 MB. Harvest is progressing smoothly in most areas and is 46 percent complete versus 54 percent a year ago and 49 percent for the average.
The funds have taken a liking to soybeans lately even though U.S. ending stocks are the highest since 2007, world stocks their second largest, and Brazil on tap for producing a record crop for 2016-17. A couple of weeks ago, the funds were long a modest 140 MB, but that has grown to 250 MB as of last week. Exports have improved dramatically the past couple of weeks with inspections last week a marketing year high of 92.1 MB. This has been a strong supportive factor for soybeans. However, be aware that exports tend to peak in November unless problems develop in South America. If there are no glitches with their production, enthusiasm for soybeans could quickly fizzle. Harvest is the U.S. is progressing without a hitch at 62 percent done, which is slightly below the average of 63 percent.
Wheat futures have shown marked improvement lately even though U.S. stocks are their highest in 22 years and global stocks the most in 30 years. The factor that has turned the wheat market around is that the funds were short a record 825 MB a couple of weeks ago and are beginning to bail on their position reducing it to 730 MB last week. Exports have been supportive with inspections last week at 16.5 MB. However, the pace of shipments has started to slip the past couple of weeks. Planting is running smoothly at 72 percent complete compared to the average of 73 percent. While usage in wheat has improved, the upside looks limited because of abundant stocks.
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