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Bullish sentiment in corn has reached fever pitched heights. Last week, the funds added 400 MB to their long position increasing it to a record 1.890 BB. They have probably added an additional 300-400 MB this week. Meanwhile, the index funds are long over 2.0 BB, their largest position since November 2014. Right now, finding a bear is like looking for a lost ball in high weeds! Next week, the USDA releases the January Crop Report and there is zero room for disappointment. If it happens, you do not want to be in front of the stampede that could follow. Another issue on the radar is the dollar appears to be in its last leg down in the sell-off that began last March. However, it is being overshadowed as the focus is on South America’s weather. In other developments, export inspections last week were 35.9 MB and must average 60.6 MB each week to reach USDA’s target of 2.650 BB. Although the pace has improved since mid-November, there are bumps in the road.
The fund long position in soybeans is excessive at 875 MB but not to the level of corn. For the moment, the focus is fixed on weather in South America. While widespread rainfall has developed in Brazil recently, it has been more sparse in Argentina. However, showers are forecast next week. South America’s production estimate will be of key interest in next week’s crop report. Looking at exports, inspections last week were 47.9 MB, the third lowest of the season. Since mid-November, the pace of shipments has fallen 19.2 percent. Historically, they peak in November and decline 65-80 percent until the end of the marketing year. Shipments to China topped the first week of November and have fallen 43.9 percent. While no eyes are focused on this now, it will eventually get noticed.
Wheat continues to be supported from gains in corn and wheat. Meanwhile, recent moisture received in the Plains will be a limiting factor. Export inspections last week were dismal at 11.9 MB and must average 20.9 MB on a weekly basis to reach USDA’s target of 985 MB. Since early December, the pace of shipments has declined 25.4 percent. When the dollar bottoms, it will pose a problem for wheat.
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