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On Monday, the USDA lowered their yield estimate for corn to 173.4 bpa with 2014-15 ending stocks at 2.008 BB, down 73 MB from October. Although this is construed as being friendly with futures rising this week, the market faces some hurdles. One is the trend following funds are long 625 MB, their largest position since May. At that time, planting was underway, and the crop faced the uncertainty of summer weather. The second obstacle is that the dollar is at its highest level since 2010 making U.S. corn the most expensive on the planet to foreign users. Inspections last week attest to this as they were 20.3 MB, slightly above the marketing year low of 16.7 MB set a couple of weeks ago. The pace of shipments has fallen since early October, and will likely continue as long as the dollar stays strong. This will not end well. Meanwhile, harvest is in the home stretch at 80 percent complete compared to 65 percent a week ago and is on par with the average.
USDA has raised their yield estimate for soybeans to 47.5 bpa and project 2014-15 ending stocks at 450 MB, unchanged from last month. They increased exports 20 MB to 1.720 BB. Exports have been stellar this season with inspections last week at 91.1 MB. The prior week, they set a record at 101.8 MB. However, the pace is unlikely to continue as exports generally peak by the third week of November. In the meantime, look for the USDA to increase their projection again next month. Although exports have been dynamic, global stocks are a record 90.3 million tons with stocks-to-usage in the upper third of their twenty year range at 31.5 percent. In other developments, harvest is winding down at 90 percent complete compared to 83 percent a week ago and 91 percent for the average. Much of the reason for the market’s strength has been from liquidation of short positions held by the trend following funds. In September, they sported a short position of 435 MB that was reduced to 40 MB last week. Right now, they are probably flat and may have a token long position. Looking ahead, now that harvest is winding down, weather in South America will be the focus among traders who are expecting a record crop.
Wheat futures surged this week from cold conditions forecast in the Plains and Midwest. Meanwhile, winter wheat planting is nearly done at 90 percent complete with 60 percent of the crop rated in good-to-excellent condition, up one point from a week ago and compares to 65 percent last year. On Monday, USDA lowered their 2014-15 ending stocks estimate 10 MB 544 MB. However, world stocks rose 300,000 tons to 192.9 million reflecting an adequate supply of wheat. In other developments, strength in the dollar has been crimping exports with inspections last week 11.6 MB and below the average needed to reach USDA’s projection of 925 MB. If the pace continues, their target could be lowered 40-50 MB. Since September, the trend following funds have been liquidating their short position and trimmed it 50 MB last week to 295 MB.
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