On The Money Grain Commentary 11-20-14

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Corn Outlook:

Harvest is winding down at 89 percent complete and finding fresh news is challenging.  However, that does not mean the corn market has nothing on its plate.  Fewer acres are projected to be planted in the U.S. next spring, along with the potential for smaller crops in Argentina and Brazil.  In the meantime, producers are storing a record crop and facing lower prices from a year ago.  The dollar is at a four year high making U.S. corn more expensive to foreign users.  This showed last week with inspections a marketing year low at 15.7 MB.  In addition, the pace of shipments has fallen 40 percent since early October.  Another threat to values is that the trend following funds are long 720 MB, their largest position since May.  This could be exacerbating for the market with exports struggling, and a record crop being held in storage.

Bean Outlook:

       Soybean futures have lost their Mo Jo lately as the U.S. is overvalued compared to South America.  Argentine soybean meal is currently $70 a ton cheaper, while Brazil is a $90 discount.  In the meantime, record planting is expected in the Midwest next spring, while a larger crop is forecast in Argentina and Brazil.  So far, the crop in South America is off to a good start.  Meanwhile, harvest in the Midwest is winding down at 94 percent complete.  The bright spot supporting soybeans is that exports are sizzling.  Last week, inspections were a record 114.3 MB.  However, historically, shipments tend to cool off after the third week of November.  China took 89.3 MB or 78 percent of last week’s business.  This is a bit of a concern as our exports are primarily dependent upon them.  In other developments, the trend following funds have flipped from a short position of 40 MB and are currently long 30 MB.

Wheat Outlook:

Wheat has backpedaled this week because of overbought conditions.  The market is facing a hurdle from the strong dollar making U.S. wheat the most expensive on the planet.  This is apparent from reports of feed wheat from France being booked for the East coast.  Meanwhile, inspections last week were a marketing year low of 5.1 MB.  During the past four weeks, inspections have only averaged 7.9 MB.  In other developments, planting is winding down at 90 percent done with 60 percent of the crop rated in good-to-excellent condition, unchanged from a week ago.  After six consecutive weeks of reducing their short position, the trend following funds increased it 15 MB last week to 250 MB.

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