On The Money Grain Commentary 1-14-16

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Corn Outlook:

The 2015 corn crop is in the history books, and traders will now focus on weather and planting intentions for 2016. USDA’s final tally for 2015 production was 13.601 BB with a yield of 168.4 bpa and ending stocks at 1.802 BB. World stocks were down 3.0 million tons to 208.9 million. Their estimate for domestic and global stocks was less than traders had expected. Can 2016 produce three near record yields in a row? The odds may be stacked against it happening, but keep in mind that seed genetics are consistently improving. USDA’s export estimate fell 50 MB to 1.7 BB. Inspections last week were 21.6 MB, which is below the average of 39.5 MB needed each week to reach USDA’s new projection. In other developments, the funds increased their short position 165 MB last week to 1.065 BB. This is their largest short position since November 2013.

Bean Outlook:

USDA’s final tab on 2015 crop production was 3.930 BB with a yield of 48.0 BB and ending stocks at 441 MB. This is a reduction of 25 MB from December and the reason for world stocks falling 3.3 million tons to 79.3 million. While stockpiles were less than expected, South America’s production did not budge with Argentina’s crop reported at 57 million tons and Brazil at 100 million. Be aware that conditions in the northern and southern states of Brazil have improved over the past few weeks, which should benefit the portion of the crop filling pods. Meanwhile, exports were lowered 25 MB by the USDA to 1.690 BB. Inspections last week were below the previous week at 45.7 MB. Since shipments peaked in November, the pace has fallen 42 percent. The funds are becoming more bearish as they increased their short position 110 MB last week to a record 625 MB. This may lead to bouts short covering. In the meantime, now that the final stats are in for the 2015 soybean crop, look for traders to focus on harvest yields in South America, spring weather forecasts, and planting intentions.

Wheat Outlook:

In most circumstances, traders would be aghast with the USDA raising ending stocks of wheat 30 MB to 941 MB and world stocks 2.2 million tons to 232 million. However, they were equally stunned by the 2.8 million acre reduction in winter wheat acres to 36.7 million. While the report offers bearish tendencies for old crop wheat, it may underpin new crop as weather remains a factor in March-May. In other developments export inspections last week improved slightly to 14.4 MB, but were below the average of 16.1 MB needed each week to reach USDA’s target of 800 MB. Meanwhile, the funds are loading the boat as they increased their short position to a record 650 MB. At the same time, commercial traders have increased their longs to 140 MB. This is the greatest extreme that I can recall, which may unnerve the funds and force them to cover.

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