On The Money Grain Commentary 1-28-16

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Corn Outlook:

If you are looking for thrills, you will probably not find them in the grains, at least not until after the Planting Intentions Report on March 31st. News is sparse, but generally favors the bears. Currently, the gurus expect a slight increase in both corn and soybeans acres this spring. However, that could change as neither corn or soybeans offer much more than a breakeven proposition. Right now, the funds are bearish, but are beginning to cover some of their shorts in corn. Last week, they liquidated 185 MB reducing their short position to 1.015 BB. A couple of weeks ago, it stood at a record 1.2 BB. Exports are lethargic with inspections last week at 23.6 MB. We must ship 40.5 MB each week to reach USDA’s projection of 1.7 BB. Although the news favors the bears, there may not be a great deal of incentive for the funds to add to their shorts at these levels.

Bean Outlook:

Soybean harvest in Brazil is cranking up and is 1.5 percent complete compared to 3.5 percent a year ago and 2.0 percent for the five year average. Harvest has gotten off to a slow start because of recent showers in Mato Grossa. Recent ratings put 30 percent of their crop in poor to very poor condition. As a result, some private sources in Brazil are reducing their production estimates, but a record crop is still expected. Back home, exports continue to wane. Inspections last week were respectable at 43.9 MB, but the pace of shipments has declined 45 percent from its peak in November. If shipments follow the norm and fall 85 percent, weekly inspections could be at 13.5 MB before the marketing year ends. In other developments, the funds have reduced their short position for the second consecutive week. Last week, they shed 140 MB reducing their shorts to 385 MB. In the weeks ahead, traders will be monitoring South America’s soybean harvest progress and whether they are still on the road to a record crop.

Wheat Outlook:

Wheat has been underpinned the past couple of weeks from fund short covering. Last week, the funds trimmed 55 MB from their position reducing their shorts to 505 MB. Weather in the Plains is mostly favorable for winter wheat, while snow cover in Ukraine and Russia appears adequate against freezing conditions. Meanwhile, U.S. exports remain a sore spot. Inspections last week were the second lowest for the season at 6.9 MB. We must ship 16.8 MB each week to reach USDA’s projection of 800 MB. As it stands now, the pace is running about 100 MB short of their target. However, U.S. business may get a boost if Russia restricts exports as rumored. While much of the news in wheat remains negative, attracting new sellers may be difficult .

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