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USDA turned the table on the bears this week when they lowered their September stocks estimate to 1.995 BB. This was 248 MB below the trade guess and 225 MB lower than a year ago. June-August usage was more than expected. Because of the reduction in stocks, traders will be more sensitive to harvest yield reports. Looking at exports, they are running ahead of a year ago, but must improve to reach USDA’s target of 2.325 BB. Last week, inspections were nominal at 31.7 MB and must average 46.1 MB on a weekly basis to meet their projection. In the weeks ahead, the focus will turn to weather and growing conditions in South America. A production shortfall in this region would change the landscape and arouse the bull’s interest.
Soybeans got a shot in the arm this week with USDA’s September stocks estimate of 523 MB. This was 52 MB below the trade guess and 386 MB lower than a year ago. Meanwhile, China remains an active buyer of U.S. soybeans, and that will likely continue until Brazil is further along in planting. Right now, they are just getting underway. In other developments, 20 percent of the soybean crop was harvested last week compared to the average of 15 percent. With an open window in weather for the next couple of weeks, progress should accelerate. Looking at exports, inspections last week were a marketing year low of 44.5 MB with China taking 32.8 MB. While the pace of shipments has been brisk so far this season, it usually diminishes in November when planted acres in South America become known. For now, my greatest concern for soybeans is that the funds are long 840 MB, their largest position since June 2016.
Wheat has found support from the strength in corn and soybeans in addition to concerns of dry conditions in Russia. About 60 percent of their crop is planted and little rain is in the forecast. In other developments, winter wheat planting is well underway and 35 percent complete- 2 points above the average. Export inspections last week were 20.7 MB and above the average that must be shipped each week to reach USDA’s projection of 975 MB. Look for wheat to be a follower of corn and soybeans, but if conditions worsen in Russia, it will trade more on its own merits.
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