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The bull’s wounds may be starting to heal from the USDA increasing their yield estimate on corn a jaw dropping 4.4 bpa to 178.4 bpa. This has triggered chatter in the trade circles that September’s yield projection might be up as well. This could happen, but if you closely examine the global side of the balance sheet, stockpiles are down 19.5 percent from a year ago while demand is up 2.9 percent for a total reduction of 22.4 percent. In addition, world stocks-to-usage are their lowest since 1973-74. Long story short, we can ill afford a hiccup in South America or the Midwest for the 2018-19 season. In other developments, the crop rating fell one-point to 70 percent in good-to-excellent condition and compares to the 10-year average of 63 percent. The funds have reduced their short position to 210 MB.
Fundamentally, being bullish soybeans seems futile because of record U.S. and global ending stocks. However, the market managed a double-digit bounce midweek on news that trade talks with China might resume later this month. For the past couple of months, the Trump Administration and China have been playing a cat and mouse game. Hopefully, something will get if they meet, but the icy relations could continue until exportable supplies from South America begin to dwindle. In the meantime, be aware that Brazil has had a record crop for three consecutive years. They have not gone more than four years without having a setback in production. This suggests that South America’s weather will monitored closely during the growing season as the first sign of trouble could bring China back to the table quickly. In other developments, the crop rating slipped one point to 66 percent in good-to-excellent condition and compares to the 10-year average of 61 percent. Looking at the funds, they have increased their shorts to 475 MB.
Bullish enthusiasm for wheat has waned because of USDA’s export forecast from the Black Sea Region rising 2.0 million tons over last month. However, exports from Europe are projected to be down 4.5 million tons which will eventually swing business to the U.S. If one looks at the net change in global stocks, they are forecast to fall 6.0 percent. This is their first reduction since 2012 meaning that stocks are on the downswing. In other developments, spring wheat harvest is running ahead of schedule at 35 percent complete versus the average of 27 percent. Looking at the funds, they are long a modest 55 MB.
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