On The Money Grain Commentary 8-24-17

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Corn Outlook:

The grains remind me of the TV commercial advertising the medical alert device, “I’ve fallen, and I can’t get up.” Since July, corn values have sunk 13.5 percent with many wondering if there is a bottom. It may be closer than you think when you examine the Commitment of Traders Report. It shows the trend following fund have increased their shorts to a modest 175 MB. However, commercial accounts have reduced their shorts 25 percent since July, and the index funds have increased their longs by 24 percent. The could eventually put a squeeze on the trend following funds causing them to cover their position. Looking at the ratings, 62 percent of the corn crop is in good-to-excellent condition, unchanged from the previous week. According to Ag Watch’s yield model, the national yield is 163.0 bpa compared to USDA’s estimate of 169.5 bpa.

Bean Outlook:

Soybeans have posted a modest recovery the past few days as they are attempting to rebound from a 12.0 percent decline since July. Like corn, the Commitment of Traders Report shows that the trend following funds may be boxing themselves into a corner. As of last week, they were short 235 MB. Meanwhile, commercial accounts have trimmed their shorts 56 percent since July while the index funds have increased their longs 52 percent. This could put some pressure on the trend following funds to cover. In the meantime, the soybean rating rose 1.0 point last week to 60 percent of the crop in good-to-excellent condition. According to Ag Watch’s yield model, this translates to a national yield of 49.0 bpa versus USDA’s yield estimate of 49.4 bpa. While positive news in soybeans has been hard to come by recently, shipments to China have picked up the past couple of weeks, plus the Commerce Department has imposed preliminary import duties on Argentine and Indonesian biodiesel imports.

Wheat Outlook:

Each day, it seems that wheat posts a new low. Since July, prices have fallen 26.4 percent. Similar to corn and soybeans, the Commitment of Traders Report shows that the trend following funds have amassed a short position of 375 MB. Meanwhile, since July, commercial accounts have covered 50 percent of their short position, while the index funds have increased their longs by 12 percent. At some point, this will likely tighten the screws on the trend following funds causing them to lighten their shorts. Right now, there is little news in wheat, but prices have reached a level making U.S. wheat one of the cheapest sources on the world market. In other developments, spring wheat harvest is 58 percent complete compared to the average of 51 percent.

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