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Corn began the week on solid footing, but has since backed off. In the meantime, the fund short position has grown to 310 MB, but the index funds have increased their longs to 1.760 BB. This is their largest long position since July. In time, this may force the funds to abandon their shorts. In other developments, exports have picked up with inspections last week at 45.2 MB. Since the first week of November, the pace of shipments has improved nearly 27 percent. Even though world stocks are at a 30-year high, the recent improvement in export demand and technical action is offering the bulls some encouragement.
Currently, the issue that catches my eye in soybeans is that exports are slipping. Inspections last week were a robust 70.1 MB, but have eroded the past few weeks. Since peaking the first week of November, the pace of shipments has fallen 14 percent. Meanwhile, the pace of shipments to China has declined 39 percent. This will not keep the bulls boat afloat. Another issue is that the funds have increased their longs 130 MB to 675 MB. However, the long position of the index funds has grown to 775 MB, their largest long since July 2012. If you recall, prices back then were near $18 and when they peaked, they fell nearly 25 percent. With Brazil slated for another potential record crop, and U.S. stocks at a ten-year high, the bulls will need an additional stimulus to keep the ball in their court.
For the past several weeks, wheat has not had much of a story to tell. Portions of the southern Plains have been dry, but are expected to receive moisture. U.S. ending stocks are at a 22-year high, while world stocks are at a 30-year high. Export inspections last week were 16.6 MB, but below the average needed to reach USDA’s projection of 975 MB. In the meantime, the pace of shipments has fallen 53 percent since late September. These issues are not very supportive in building a bullish case. However, the factor that must not be overlooked is that the funds are short 695 MB. This in itself could muster a bout of short covering.
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