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The jonquils and hyacinths are popping out of the ground, which means it will not be long before the planters begin to roll. Because of the spring like conditions during February, the focus on planting and weather will occur sooner than normal. For the moment, grain producers continue to wrestle with the decision of their planting mix between corn and soybeans. Most estimates circulating are that 3-6 million fewer acres of corn will be planted this spring. Meanwhile, the funds are turned more bullish last week as they increased their longs 295 MB to 400 MB. Another bright spot is that inspections last week stood at 45.3 MB and were above the average needed to reach USDA’s projection of 2.225 BB. During the past four weeks, the pace of shipments has improved 36 percent.
The funds have been big supporters of soybeans over the past several weeks, but they may have overloaded the boat. Last week, they bought 95 MB increasing their longs to 735 MB. This is their largest position since last July. In the meantime, the index funds have increased their long position 22.7 percent since early January. As mentioned in other comments, the index funds take a stance on expectations for interest rates, growth in the economy, and inflation. Looking at Brazil, their harvest is progressing briskly at 26 percent complete compared to the average of 18 percent. Yields in Mato Gross are reported at 15.1 percent above a year ago. This keeps Brazil on track for a record crop and should help alleviate concerns of losses in Argentina. Export inspections slipped to 39.5 MB last week with the pace of shipments falling 50 percent since peaking in November. Meanwhile, the outbreak of bird flu in China may curtail meal demand. Be aware that the factors just mentioned put the funds at complete odds with the fundamentals.
Wheat may get interesting in the weeks ahead because of fewer acres planted last fall and a warm February, which could bring the crop out of dormancy too early. There are some reports of wheat that is already jointing. Although Russia has garnered the lion’s share of sales to Egypt recently, the pace of U.S. shipments has picked up recently with inspections last week at 20.5 MB. In the meantime, the funds continue to cover shorts as they reduced them 160 MB last week to 305 MB. Additional short covering is likely
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