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Thanksgiving, Black Friday, and Cyber Monday have passed which means that the Christmas season is in full swing. That said, liquidity can be expected to diminish into yearend which could lead to an increase in volatility. Money managers will be closing out positions, especially if they have a profit in open trade equity. They do not want to be taxed on profits, and risk seeing them turn into a loss after the first of the year. Looking at corn, it has struggled for much of November because the trade spat with China and declining export pace for the past several weeks. However, the pace picked up last week with inspections at 43.9 MB. Currently, shipments are running nip and tuck in reaching USDA’s projection of 2.450 BB. Meanwhile, the funds have turned more bearish as they have increased their short position to 295 MB.
Hope springs eternal. Optimism has grown that the U.S. and China might resolve their differences at the G-20 meeting this weekend. President Trump is playing a hand of poker going into the meeting as he has announced plans to move forward on boosting tariff levels on $200 billion of Chinese goods to 25 percent. If negotiations fall apart, there are plans to put tariffs on imports that are not already subject to duties. Keep in mind that if a token agreement is reached, world stocks of soybeans are at a record level, and China’s demand will be diminished because of the outbreak of African Swine flu. Meanwhile, soybean export inspections last week were 40.6 MB and above the average needed to reach USDA’s projection of 1.9 BB. Even with the improvement, however, the pace has slipped the past couple of weeks. This should not come as a surprise as shipments generally peak in early November. Looking at the funds, they are more bearish as they have increased their short position to 575 MB.
The recent skirmish between Russia and Ukraine is a supportive factor for wheat as it could lead to an increase in exports. It is sorely needed as shipments out of the Black Sea Region have been a thorn in the side of U.S. exports. Inspections were a marketing year low last week at 9.2 MB. We need to ship 24.2 MB each week to reach USDA’s forecast of 1.025 BB but are on track for shipments of only 724 MB. Last week, the rating for wheat stood unchanged at 55 percent of the crop rated in good-to-excellent condition. Meanwhile, emergence is running nearly 10 percent below the average in Kansas, Missouri, and Oklahoma that could become a factor down the road. Looking at the funds they are becoming more bearish as they have increased their short position to 300 MB.
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