On The Money Grain Commentary 1-15-15

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Corn Outlook:

Corn futures came out of the January Crop Report unscathed as 2014-15 ending stocks were lowered to 1.877 BB, while world stocks fell 1.5 percent to 189.2 million tons.  However, the positive sentiment did not last long as prices have sold off from stocks still being more than adequate to meet demand.  For now, the bulls have nothing to sink their teeth into until spring, when planting begins.  In other developments, export inspections were 19.6 MB, their lowest in nine weeks.  The pace of shipments is falling putting USDA’s target of 1.750 BB in jeopardy.  Last week, the trend following funds trimmed 65 MB from their longs reducing them to 845 MB.  This is the second week that their position has declined.  If they continue to unwind, the upside in corn will be limited.  Meanwhile, the stronger dollar and declining oil prices will likely weigh on values.

Bean Outlook:

      The bulls found nothing to celebrate in the final crop report for 2014 as ending stocks stayed unchanged at 410 MB, while world stocks-to-usage rose to a record 31.7 percent.  As expected, Brazil is on tap to produce a record crop with the USDA raising their production 1.5 million tons to 95.5 million.  The one bright spot in the report was exports rising 10 MB to 1.770 BB.  Inspections last week were 67.5 MB with China taking 34.8 MB or 51 percent of shipments.  There was a slight uptick in the pace of shipments last week, the first seen since they peaked in November.  In other developments, the trend following funds have flip flopped from a short position of 15 MB to a token long of 5 MB.  However, based upon this week’s decline, I look for them to switch gears again.  During the next seven days, warmer temperatures, accompanied with little rainfall are forecast in northern Brazil.  However, conditions are favorable elsewhere giving the bears the edge.

Wheat Outlook:

The positive news of a 1.9 million acre reduction in winter wheat seedings to 40.5 million by USDA was largely ignored by traders as it was offset by 2014-15 ending stocks being raised to 687 MB.  In addition, world stockpiles grew 1.1 million tons to 196.0 million.  The point to be taken from the reduction in wheat plantings is that these acres will find a home in corn or soybeans for 2015.  In other developments, export inspections were 8.7 MB and below the average needed to reach USDA’s target of 925 MB.  The dollar trading at a nine year high has been a killer for U.S. exports.  Look for them to be reduced in future reports.  Last week, the trend following funds added 45 MB to their short position increasing it to 125 MB.  There is room for it to grow as the high last April was 450 MB.

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