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The heat has been turned up in the kitchen, as corn futures have risen past points of resistance causing the funds to begin covering their massive short position. Last week, they trimmed 50 MB from their shorts reducing them to 1.240 BB. Additional short covering is likely. While this is supportive to the market now, we need not overlook the fact that domestic and global stocks are plentiful. Looking at exports, they have finally shown some life as inspections last week were a marketing year high of 39.1 MB. However, this was still below the average of 44.6 MB that need to be shipped each week to reach USDA’s target of 1.925 BB. Long story short, we have a long road to hoe to achieve their projection.
Problematic weather in Argentina has underpinned soybeans since mid-January. However, the market met a headwind this week. Although rainfall is forecast to be limited in Argentina next week, any shortfall in production will likely be made up by Brazil. Keep in mind that world stocks are at a record level, and the price relationship between corn and soybeans leans to an increase in planted soybean acres this spring. Meanwhile, the funds covered 100 MB of their short position last week reducing it to 585 MB. Looking at exports, inspections last week were 40.6 MB. After an uptick in the pace of shipments a couple of weeks ago, they backed off last week.
Wheat is being underpinned from deteriorating crop conditions in the southern Plains. The U.S. Drought Monitor shows that pattern is unlikely to change any time soon. In the meantime, the funds are holding a massive short position. Last week, they increased their shorts 10 MB to 830 MB. If they cover, it could carry prices higher than many expect. Meanwhile, export inspections last week were reported at 21.3 MB with the pace of shipments seeing their first uptick since mid-December. While this is a promising sign considering the competition from the Black Sea region, we have a long hill to climb to reach USDA’s projection of 975 MB.
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