On The Money Grain Commentary 9-22-16

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Corn Outlook:

The crop rating in corn is much like the energizer bunny, it keeps on marching. Normally, the ratings are trending lower into harvest, but they have stood at 74 percent in good-to-excellent condition for the past three weeks. According to Ag Watch’s yield model, the national yield is 171.6 bpa compared to USDA’s estimate of 174.4 bpa. Harvest is off to slow start with 9 percent of the crop cut compared to 12 percent for the average. With a record crop likely, strong demand is essential. So far, that has occurred with the pace of shipments rising the past four weeks and inspections last week of 50.5 MB. Looking at the funds, they covered 195 MB from their shorts last week reducing them to 790 MB. This was the first week since the end of July that they did not add to their position, and offers the bulls a glimmer of hope.

Bean Outlook:

Like corn, the crop rating for soybeans has remained strong the past four weeks with 73 percent of the crop reported in good-to-excellent condition. According to Ag Watch’s model, the national yield is 50.3 bpa, which is slightly below USDA’s estimate of 50.6 bpa. Any way that you slice it, we are facing a record yield. Offsetting the prospect for a record crop has been brisk demand. Last week, export inspections were 27.7 MB with China taking 14.6 MB or 52 percent of shipments. However, where the rubber may meet the road is that Brazil is in the early stages of planting and forecast to see a 4.5 million ton boost in their production over last year. This would be a new record. In addition, the USDA lowered China’s imports 1.0 million tons in their last report. Meanwhile, the funds reduced their longs 35 MB last week to 260 MB, which was their third week of liquidation. They need to come back to the table because, without their support, gains in soybeans will be limited unless issues arise in South America.

Wheat Outlook:

Wheat continues to be a follower of corn and soybeans. Planting is progressing without a hitch, and is 17 percent complete compared to the average of 16 percent. As I mentioned last week, plantings may fall 3.1-4.7 million acres because of low values. Looking at exports, inspections last week were 20.6 MB, and above the average needed to reach USDA’s target of 950 MB. Last week was the third consecutive week that the pace of shipments has improved. Meanwhile, the funds trimmed their shorts last week 25 MB to 710 MB. If they cover additional shorts, it may be a sign that they intend to lighten the load.

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