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Corn futures firmed up this week from strength in soybeans. Since late December, the funds have been short, but have since whittled their position to 50 MB as of last week. As we get closer to planting, possibly in March, the chances are that they will establish a few longs ahead of the growing season. Looking at the supply-demand report, USDA lowered ending stocks 35 MB to 2.320 BB. World stocks fell 3.4 million tons to 217.6 million. Although global stocks remain abundant, it has a slightly bullish tilt and could entice the funds to cover remaining shorts.
The Lunar New Year has passed, which has created optimism among traders that China will be seeking more soybeans. Last week, the funds reduced their longs 105 MB to 665 MB, but have since come back to the table. Keep in mind that the big money has been long soybeans even though global stocks are abundant. That can be seen from the index funds pumping $6.9 billion into commodities during January. What they are doing is betting on an uptick in the economy and inflation. Their interest is also seen in other commodities such as the metals, lumber, cotton, and sugar. Meanwhile, looking at the supply-demand report, the USDA left their ending stocks estimate unchanged at 420 MB. However, world stocks were lowered 1.9 million tons to 80.4 million. No changes were made to Brazil’s crop at 104.0 million tons, but Argentina’s production dropped 1.5 million tons to 55.5 million.
USDA’s ending stocks estimate for wheat fell 47 MB to 1.139 BB, while world stocks were down 4.7 million tons to 248.6. Overall, the report shows that the glut of wheat is slowly begin to trickle down. Currently, the funds are short 530 MB and with prices rising to their highest level since October, they may be forced to cover.
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