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Thanksgiving is tomorrow, which marks the beginning of the holiday season. Harvest is done and the crop is in the bin, which means that there will be little commercial activity over the next several weeks. At the end of December, the funds will close out their year. If a fund manager has generated good profits, they will not be eager to add new positions next month and jeopardize their gains. In the meantime, managers who are running at the end of the pack, may feel compelled to take extraordinary risks. This could create an inordinate amount of volatility. Last week, the funds added a staggering 330 MB to their shorts in corn increasing them to 425 MB. Meanwhile, export inspections were 34.4 MB’ and below the average needed to reach USDA’s projection of 2.225 BB. However, there was an uptick in the pace of shipments, the first seen since September.
Soybeans continued to be underpinned from rising palm oil values and enthusiasm over exports to China. Last week, inspections were 97.9 MB with China taking 71.6 MB or 73 percent of shipments. It may have gone unnoticed, but there was a slight downtick in the pace of shipments, the first seen since mid-September. This is a heads up, and if it occurs again next week, the chances are that exports may have peaked. As mentioned in previous comments, when shipments top, they fall, on average 83 percent into the end of the marketing year. Looking at South America, some areas in southern Brazil are dryer than normal, but rain is in the longer-term forecast. Last week, the funds lightened their longs in soybeans reducing them 150 MB to 430 MB. However, Monday’s strength implies that they came back to the table. While exports continue to be the supportive factor in soybeans, when they peak, the focus will quickly turn to record supply.
Wheat continues to drift aimlessly. Dryness in the Plains and portions of the Midwest underpin, but stocks are abundant. Last week, the funds became more aggressive in their selling increasing their short position 90 MB to 770 MB. This is short of the record at 825 MB. Export inspections improved over the previous week at 15.7 MB, but were still below the average needed to reach USDA’s target of 975 MB. In other developments, the crop rating fell one point to 58 percent and compares to 53 percent a year ago and 54 percent for the 10-year average.
On The Money Grain Commentary 11-17-16
Posted on November 17, 2016 by admin
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A sense of calm has returned to the grain and financial markets following the volatility created last week by the surprise election of Donald Trump as the 45th President. Right now, traders are interested in his cabinet appointments, and the impact that they will have on the economy and foreign relations. Most believe that his agenda will be positive to the economy. In the meantime, attention is returning to ag trade, planting intentions next spring, and weather in South America. While corn exports are still running ahead of a year ago, shipments have fallen 48 percent since September with inspections last week a modest 24.3 MB. The four percent rise in the dollar recently will cut into them even more. Looking at the funds, they cut their short position 170 MB to 95 MB. This was their sixth week of liquidation.
Soybean exports to China remain red hot, but prices are struggling to capitalize. Maybe, it is because of the strength in the dollar, or knowing that once the crop in South America is planted, the other shoe will drop. Currently, planting in Brazil is 63 percent complete. In the meantime, exports continue to sizzle with inspections last week at 102.3 MB. China took 85.7 MB or 83 percent of shipments. However, when their buying interest fades in favor of Brazilian soybeans, it could be like shutting off the water spigot. As I have mentioned in previous comments, when exports peak, they fall, on average, 83 percent before the marketing year ends. As far as the funds go, they increased their longs 70 MB last week to 580 MB. This is the largest position that they have held since July.
Wheat is struggling, and the strength in the dollar is not helping. With world stocks their highest in 30 years, a stronger dollar will further inhibit U.S. exports. This was seen last week with inspections last week a marketing year low of 7.0 MB. Meanwhile, the rating for wheat improved one point last week to 59 percent of the crop in good-to-excellent condition. This compares to a rating of 52 percent a year ago. Regarding the funds, they added 30 MB to their short position last week increasing it to 680 MB.
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