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Grain producers are going to have to make some tough decisions next month as to what they intend to plant for 2018. While USDA’s estimate in November projects planted acres of corn at 91.0 million, there is little incentive to plant at this price level. Prices will either improve, or fewer acres will be planted. Meanwhile, the funds may be getting a little too “comfy” with their short position, as it has risen to 1.290 BB. This is only 35 MB shy of the record set in March 2016. When they covered back then, futures rose 26 percent and peaked in June. That is not to say it will happen again this time, but does mean that they may be boxing themselves into a corner. Looking at exports, inspections last week were 23.9 MB and below the average of 42.7 MB needed each week to reach USDA’s target of 1.925 BB.
After being tarred and feathered the past few weeks, soybeans mustered a brief reprieve early this week only to see it stall, as little has changed in the fundamental picture. Weather has improved in Brazil and Argentina, which has put concerns of La Nina on the wayside for the moment leaving the bulls discouraged. In the meantime, exports continue to drop off with inspections last week falling to 47.1 MB. After peaking in November, shipments have slid 37 percent. Looking at the funds, they did huge about face last week when they dumped 245 MB of their long position putting them short 285 MB.
Cold weather in the Plains and improving exports are supporting wheat. Meanwhile, the funds are sporting a short position of 835 MB. Like corn, the boat has apparently not been rocked enough to cause them to cover. Export inspections last week were 18.1 MB and below the average of 18.4 MB needed to be shipped each to reach USDA’s projection of 975 MB. However, they are headed in the right direction with the pace of shipments improving 67 percent since early November.
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