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For over a month, the bears ruled the grains with an iron fist. This is evident from the funds increasing their short position in corn to 825 MB, the largest since last September. The bears may be getting overconfident as they are leaving little wiggle room if there is a mishap with Mother Nature this summer. Looking at the longer-term picture, the fundamentals are showing subtle signs of improving as global stocks may decline because of expectations for China’s production to fall 12.5 million tons. Meanwhile, the market was spooked Wednesday from news that the Trump Administration was drafting an executive order to pull out of NAFTA. However, Trump officials later clarified that their plan is for a renegotiation of the treaty. Planting is lagging slightly below the average pace at 17 percent. Progress will remain slow as wet conditions are forecast into early May. Export inspections were sound last week at 57.2 MB.
Planting a potential record soybean crop is just getting underway at 6 percent done compared to the average of 3 percent. With a normal yield, ending stocks next fall could exceed 650 MB versus 445 MB for 2016-17. This comes on top of a record crop in South America. Export inspections last week exceeded the previous week at 23.3 MB, but are facing an uphill struggle with the availability of Brazil’s crop. Looking at the funds, they are becoming more bearish as they added 100 MB to their short position last week increasing it to 370 MB.
Wheat fell to a new contract low this week on expectations that moisture in the Plains will give the ratings a boost. However, they remained unchanged at 54 percent in good-to-excellent condition. Because of wet conditions, spring wheat planting is off to a slow start at 22 percent complete, trailing the average of 34 percent. Export inspections were nothing to get excited about at 23.3 MB, which was below the average of 25.1 MB needed each week to reach USDA’s target of 1.025 BB. The funds have really tightened the screws on wheat increasing their shorts to a record 865 MB. Bottom line–the bears are overcrowding the exits if someone yells fire.
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