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Santa was busy stuffing Christmas stockings with presents and toys last week, while the Grinch was handing out lumps of coal to grain producers! While Christmas tidings were a little late, rewards were presented right after the holiday break. This may have been from expectations that the index funds will rebalance their position after the first of the year. Looking at corn, the funds became more aggressive in their short stance last week increasing their position 130 MB to 450 MB. This was the fourth consecutive week of adding to their shorts. Export inspections were 38.3 MB, and below the average needed to reach USDA’s target of 2.225 BB. After traders ring in the New Year holiday, the debate will heat up for planting intentions for 2017.
The bulls came out swinging in soybeans after the Christmas break on gains in palm oil. The Quarterly Hogs & Pigs Report may have offered support as it showed the number of pigs 2 percent above expectations. Meanwhile, weather in South America remains favorable with Argentina picking up a few showers over Christmas. However, a small area in the southeastern section missed the event. Harvesting of early soybeans has begun in Mato Grosso with some exceptional yields being reported. Export inspections were reported at 62.8 MB and have declined for the sixth consecutive week. Shipments are down 34 percent from their peak in November. Looking at the funds, they trimmed their longs 75 MB last week to 535 MB. However, the strength early this week shows that they may be adding to their position again. Looking at 2017, we are likely staring at a record crop in South America with planted acres in the U.S. possibly rising 5-6 million. While this is ominous for record global stocks, the bulls are refusing to let go of their position as they seem to be posturing for higher inflation.
Wheat bounced back to life early this week after setting a new contract low before Christmas. Like corn, there may be expectations of the index funds rebalancing their position after the first of the year. In the meantime, the bears may be crowding the boat as the funds increased their short position 75 MB last week to 650 MB. This is well short of the record short position of 825 MB, but you must consider that a great deal of bearish sentiment has already been factored into values. Looking at exports, inspections last week were 19.1 MB, and slightly above the average needed to reach USDA’s target of 975 MB.
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