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Temperatures are warming up meaning that corn planting will soon be in full swing. As of last week, 3 percent of the crop was planted which is on par with the 5-year average. Issues facing the market this season are ending stocks that are the highest in 20 years, in addition to record global stockpiles. Temperatures through July are forecast to be above normal, which will be a blessing to those receiving timely rains, but a curse for those who miss out. The funds are of the mindset that few gains are to be had as they are short 690 MB. However, there is one tidbit that is being overlooked. The index funds are long 1.475 BB, their smallest position since June 2009. This eventually led to a five-buck rally over a 3-year period. While it is overly optimistic to expect that will happen anytime soon, be advised that a constructive foundation may be in the early stages of development that could turn the table on the bears.
Abundant domestic ending stocks, a record soybean crop in South America, and expectations for record plantings in the U.S. this spring are obstacles facing the bulls. Long story short, we have soybeans galore with the chance of ending stocks this fall exceeding 600 MB. The funds are short 135 MB, but it is merely a token position, and issues are lacking to cause them to abandon their stance and go long. Export inspections last week were 30.6 MB and gave the pace of shipments their first uptick in 9 weeks. While this may be seen a ray of sunshine on a cloudy day, it is premature to start handing out the party hats.
Global wheat stocks are the highest in 30 years, plus domestic stocks are abundant which will tend to limit bullish interest. In addition, the crop ratings rose 2 points last week to 53 percent in good-to-excellent condition. This compares to 56 percent a year ago and 48 percent for the 10-year average. Meanwhile, most of the bearish news has been factored into the market and uncertainty still surrounds the impact that freezing conditions had on the crop in the Midwest a few weeks ago. Furthermore, the funds are sporting a short position of 790 MB, which is just shy of the record set at 825 MB. Be advised that a mere hiccup on any front could cause massive short covering.
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