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The bears are a bit gun shy from last week’s bullish reaction to a bearish crop report. Some traders think that the USDA statisticians were smoking a Jimson weed when they goosed the corn yield to a whopping 175.1 bpa! Although the bulls are quick to point out a 5.9 percent increase in usage over last year, supply increased 9.8 percent as well. Looking at crop conditions, the rating remained unchanged last week at 74 percent in good-to-excellent condition and compares to the ten-year average of 60 percent. According to Ag Watch’s yield model, this equates to a national yield of 173.2 bpa. Export inspections fell to 46.1 MB and will have a tough go in reaching USDA’s target of 1.925 BB. The funds increased their shorts 165 MB to 595 MB last week, but may lighten up because of the bullish technical response to the crop report.
Bullish traders have gained confidence from increased soybean sales to China recently. Last week, export inspections were 27.4 MB with China taking 14.8 MB or 54 percent of shipments. While the bulls are quick to point out USDA’s projection of a 3.2 percent increase in usage over last year, the bears have some ammunition of their own in that supply is expected to rise 4.8 percent. However, the bulls control the tempo, for now, as reflected by the funds increasing their longs 35 MB to 525 MB. Meanwhile, in other developments, the crop rating for soybeans remained unchanged for the second consecutive week at 72 percent in good-to-excellent condition. This compares to last year’s rating of 63 percent and the ten-year average of 59 percent. According to Ag Watch’s yield model, this translates into a national yield of 49.9 bpa.
The fundamentals for wheat remain bearish, but that may be slowly changing. Last week, the USDA upped their usage estimate 19.6 percent from a year ago, while supply rose 17.1 percent. This reflects that we are starting to eat into stocks, albeit at a slow pace. The U.S. will face less export competition from the EU, as their exports are projected to decline 7.0 million tons. However, we will face intense opposition from the Black Sea region as their exports are forecast to rise 15.0 million tons. Meanwhile, export inspections were strong last week at 22.9 MB and above the average needed to reach USDA’s target of 950 MB. In other developments, spring wheat harvest is progressing briskly at 48 percent complete compared to the average of 30 percent. The funds reigned in their shorts last week reducing them 50 MB to 655 MB. Additional liquidation should help to prop up values.
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