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A holiday atmosphere should kick into high gear next week with many traders closing the book for 2016. This could lead to erratic price behavior because of reduced commercial and speculative activity. Looking at corn, the market faces record world stocks, but it is being partially offset by expectations for reduced plantings next spring. In addition, the average pace of exports has improved for the fourth consecutive week. However, inspections were disappointing last week at 33.8 MB. Last week, the funds increased their short position 25 MB to 335 MB. While it is not a big position, it leaves the door open for short covering if a problem arises in South America.
Soybeans are meeting a headwind from favorable conditions in Brazil, along with the forecast for improving weather in Argentina next week. In addition, exports continue to slip. Inspections last week fell for the fourth consecutive week to 67.5 MB. While this is a robust number, the pace of shipments has fallen 22 percent from their peak in early November. In the meantime, shipments to China have declined 46 percent during the same period. Currently, the funds are long 635 MB, which is down 40 MB from the previous week. Meanwhile, the index funds are long 765 MB. These positions will be difficult to maintain as record world stocks of 89.9 million tons are projected by the USDA. In addition, we are facing a potential increase in plantings next spring of 4.8-5.0 million acres, and possibly as many as 6.0-7.0 million.
Wheat faces record global stocks, as well as an improvement in the dollar. However, concerns from the lack of snow cover causing winterkill have been supportive, in addition to the funds liquidating 115 MB of their short position last week reducing it to 575 MB. Meanwhile, exports are a non-factor with inspections last week at 16.1 MB. This was below the average needed to reach USDA’s projection of 975 MB.
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