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Thanksgiving week marks the beginning of the holiday season, and is a time when interest in the grains generally wanes until the new year. Although news is sparse, the issue that captures my attention is that the funds have increased their short position in corn to 1.320 BB. This is just 5 MB shy of the record. Meanwhile, open interest has risen to its highest level since June 2011. This is a clear indication that the bears are becoming overpopulated, and that a shift in direction could be coming down the pike. While the bulls and bottom pickers would relish it happening, stocks remain abundant and exports have no sizzle. Inspections last week were 24.9 MB and must average 40.6 MB each week to reach USDA’s projection of 2.250 BB. While short covering by the funds could give the market a needed lift, a strong foundation must be laid to sustain long-term gains.
Recently, NOAA increased the chance of La Nina developing to 65-75 percent, which will keep South America’s soybean crop in the spotlight this winter. Conditions are improving in Brazil, but Argentina could use more rain. Looking at exports, they remain strong with inspections last week a healthy 78.3 MB. Meanwhile, there was a downtick in the pace of shipments suggesting that exports may be peaking. Be aware that they generally crest in November with the pace falling 85 percent on average through the end of the marketing year. Last week, the funds were active as they sold 100 MB, and are now short 60 MB. Looking down the road, soybeans will likely be supported as long as traders believe that the threat of La Nina might impact South America’s production.
Wheat futures have drifted for most of November as there is little fresh news. Fifty-two percent of the crop is rated in good-to-excellent condition, down 2 points from last week and 6 percent below a year ago. Export inspections were 9.5 MB and do little to stimulate bullish interest. They must average 19.2 MB each week to reach USDA’s projection of 1.0 BB. Currently, the U.S. accounts for 14.4 percent of global exports, while the Black Sea region dominates at 63.2 percent. Looking at the funds, they remain bearish but lightened their short position 65 MB to 660 MB.
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