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Corn futures, along with soybeans, are in the sleep mode and will likely remain there until we get closer to planting. For the moment, there is not much of story to tell with the market generally following macroeconomic factors. Ethanol margins are being squeezed, ending stocks are more than adequate, and the dollar is at a ten year high making U.S. corn the most expensive on the planet. This is being reflected in exports as the pace of shipments has been trending lower the past four weeks putting USDA’s projection of 1.750 BB in jeopardy. Last week, inspections were 29.4 MB and must average 38.2 MB each week to meet their target. In other developments, the trend following funds are throwing in the towel on their longs reducing their futures position 95 MB last week to 750 MB. This is down from the peak of 965 MB four weeks ago.
Trading in soybeans is becoming stagnant as attention is turning to South America. Earlier this week, the market was pressured from news of China cancelling purchases of 460,000 tons. Cancellations have been expected, but there is apprehension that more may be forthcoming. Last week, inspections were 55.7 MB with China taking 40.9 MB or 73.3 percent of shipments. Keep in mind that the pace of shipments peaked in November and have been falling at a rate of seven percent per week. In other developments, harvest of early planted soybeans has begun in Brazil with exceptional yields being reported. Conditions are dry in the northern areas, but elsewhere in South America, they are favorable. However, if the dryness persists, USDA may have to lower Brazil’s production from their current estimate of 95.5 million tons. During the past several weeks, the trend following funds have been flip flopping in their position. Last week, they flipped from a token long position of 5 MB to one of being short 110 MB.
Wheat is beginning to show a heartbeat after being in cardiac arrest since December. While little has changed fundamentally, the market has reached a level in which traders are reluctant to press the downside much further. This is apparent from the short position of the trend following funds remaining unchanged at 125 MB. In addition, rekindling of tensions between Russia and Ukraine is offering support. Meanwhile, the dollar is at a ten year high making U.S. wheat the most expensive to foreign users. This is reflected in exports as inspections last week were a modest 11.4 MB. To reach USDA’s projection of 925 MB, we must ship 20.8 MB each week. Until the dollar breaks, this is unlikely to happen.
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