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Global stocks of corn are their lowest since 2008, but the bulls hesitant to commit because of expectations of a record yield, the Trump Administration moving ahead with a $200 billion import tariff against China, and harvest in its early stages. Last week, harvest was 9 percent complete compared to the average of 6 percent. When it is finished, and the crop is locked away in the bin, the bargain hunters will return. In the meantime, they prefer to be patient. In other news, export inspections improved from the previous week at 40.5 MB. The funds were more active as they increased their short position to 435 MB. Depending upon yield reports, they are unlikely to unwind their position until harvest is closer to being finished. Meanwhile, do not look for the trade spat with China to be resolved until after the mid-term elections.
With a record soybean crop being forecast, and the ongoing trade dispute with China, it is difficult to envision the market going in any direction, but down. However, traders learn early on, if they are going to stay in the business, it pays to be prudent rather than blindly marching to the beat of the drummer. The strength Wednesday and Thursday testifies to this. In other matters, harvest has begun and is 6 percent complete, slightly above the average of 3 percent. Export inspections last week were run of the mill at 28.8 MB. Looking at the funds, they have become more aggressive increasing their short position 60 MB to 615 MB. I would not be surprised if it reaches the record short set in June 2017 at 735 MB.
Wheat futures have stabilized from their two month sell-off because of the drought in Europe and Australia. Expectations are that Australia’s crop will be at a 10-year low. The factor that continues to weigh on wheat is that Russia is still getting the lion’s share of export business. Last week, inspections were 14.9 MB and must average 21.0 MB each week to reach USDA’s target of 1.025 BB. Winter wheat seeding is running at 13 percent complete versus the average of 14 percent. The funds became more aggressive last week adding 95 MB to their short position bringing it to 120 MB.
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