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The fundamentals in corn are slowly turning brighter because of shrinking global supplies, a smaller crop in South America, expectations for fewer acres in the U.S., and recent improvement in exports. However, much of this has been factored into values over the past few weeks as the fund long position has grown to 1.335 BB, their largest long since September 2012. Factors that will act as a speed bump are the Federal Reserve possibly raising interest rates 3-4 times this year, and the threat of China retaliating against the Trump Administration’s import tariff on steel and aluminum. Looking at exports, inspections were a marketing year high of 55.4 MB last week. This was the third week out of four that they have registered a new high. Meanwhile, we must ship 57.0 MB per week to reach USDA’s target of 2.225 BB, which is a tall order.
A few weeks ago, soybeans were a shining star but have since become a falling star as values have declined over five percent from their contract high. Recent showers in Argentina, although light, have been a factor, in addition to sluggish exports and expectations for record planted acres in the U.S. Export inspections last week were a marketing year low at 18.0 MB. Since peaking in November, the pace of shipments has fallen 67 percent. The average decline until the end of the marketing year is 85 percent as China sources South America for their needs. Looking at the funds, the were inactive last week reducing their longs only 5 MB to 735 MB.
The sell-off in wheat has been comparable to a person falling off the balcony of a cruise ship! Since early March, prices have fallen nearly 12 percent. Although crop conditions have deteriorated significantly in the southern Plains, traders seem more concerned with abundant global stocks and lack of exports. Last week, inspections were a modest 16.2 MB and must average 17.0 MB each week to reach USDA’s projection of 925 MB. The current pace implies that we will likely fall short of that level. Looking at the funds, they have turned more bearish as they increased their short position 20 MB to 240 MB.
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