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In just over a week, the moment of truth arrives in the grains—the Planting Intentions Report. This has been the primary topic of discussion in the ag circles since last fall. Most guesses are for 90 million acres of corn and 88 million acres of soybeans being planted. Any way you slice it, the report could set the tone in the grains for the rest of the season. Looking at corn, exports continue to be the bright spot. Inspections last week were 52.4 MB and above the average needed to reach USDA’s projection of 2.225 BB. Since January, the pace of shipments has risen 71 percent. Meanwhile, the funds did an about face last week as they flipped from a long position of 330 MB to a short of 125 MB. Now, will they carry a short through the growing season?
The intentions report next week will likely determine whether soybeans will be resigned to a broad long-term trading range, or if it will trigger an extensive decline. If planted acres are more than expected, the latter could be the case as production estimates in Brazil are rising. Some private sources are pegging Brazil’s crop as high as 110-111 million tons compared to USDA’s estimate of 108 million. Looking at exports, inspections improved slightly last week at 27.0 MB, but the pace of shipments has fallen 72 percent since peaking last November. Meanwhile, the funds may be getting cold feet as they trimmed their longs 180 MB last week reducing them to 335 MB.
Soil moisture is declining in the southern Plains, but the forecast calls for rainfall later this week. The above normal temperatures in February-March means that moisture will be needed on a timely basis. In the meantime, freezing conditions in the Midwest last week may have whacked soft red winter wheat. Producers in the affected areas mention that yields have been impacted 20-30 percent. Export inspections last week at 22.9 MB were the highest seen since September. Since January, the pace of shipments has risen 84 percent. However, traders are focusing on abundant global supplies. The funds have turned up the heat as they increased their shorts 165 MB last week to 600 MB. This could become a dicey position if crop conditions deteriorate.
On The Money Grain Commentary 3-16-17
Posted on March 16, 2017 by admin
If you would like to receive our technical comments including price projections and cycle analysis for important tops and bottoms, click on the link at the bottom of the commentary to sign up for a 30-day free trial subscription. Follow Ag Watch Market Advisors on Facebook and Twitter for timely information not posted in our[
Grain producers are facing a new growing season with an 800-pound gorilla on their back. A record crop in South America that keeps getting bigger, and large stockpiles in the U.S. With corn values declining as a result, it raises the question as to how many more acres will be diverted to soybeans, and what are the chances of an exceptional yield for the third consecutive season? These questions will be answered in the weeks ahead. The bright spot in corn has been that exports have improved. Last week, inspections were a marketing year high of 60.9 MB. Meanwhile, the pace of shipments has risen 66 percent since mid-January. Looking at the funds, they have reduced their longs to 330 MB. While these are promising spots, abundant supplies overhang. However, that could change if Mother Nature does not cooperate this spring-summer.
Traders were preoccupied all winter with weather in South America that included flooding in Argentina and potential dryness in Brazil. However, all of that has changed with Brazil 56 percent done harvesting a record crop, record world stockpiles on tap, and the potential for record acres planted in the U.S. this spring. Compounding the situation is that exports have been on the down swing. Since November, the pace of shipments has fallen 69 percent and could decline as much as 83 percent. The Planting Intentions Report is just around the corner, and with the corn-soybean price relationship at 2.58:1 in favor of soybeans, a huge shift could be in the making. In the meantime, the funds were holding a long position of 515 MB as of last week. For the moment, it appears that the reality of an oversupply may finally be creeping in on soybeans.
Record global stockpiles of wheat and declining values in corn and soybeans have pulled wheat futures lower. Although the pace of exports has risen 78 percent since late January, and the funds are sporting a short position of 435 MB, only modest support has been offered. However, a factor that could come into play is that the crop, especially in the Midwest, is about four weeks ahead in development because of above normal temperatures in January and February. In addition, temperatures in the low 20’s are forecast in much of the Midwest this week which could cause freeze damage. Furthermore, let’s not forget that we still have April to get through.
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