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Thanksgiving marks the beginning of the holiday season with many traders and commercial users winding down their activity until after the new year. This often creates a void of fresh fundamental news. Liquidity usually lacks during this period, which can cause rather wide price swings for no apparent reason. With the world events and unrest that is happening today, I do not expect this holiday season to be any different. Right now, corn does not have much of a story to tell. The crop is in the bin, exports stink, and weather is mostly favorable in South America. Export inspections last week were a dismal 19.4 MB, well below the average of 38.6 MB needed each week to reach USDA’s target of 1.8 BB. In the meantime, the funds are becoming more bearish as they added 165 MB to their short position last week increasing it to 695 MB.
Concerns are mounting that the newly elected president of Argentina could cause a ripple in U.S. exports. He has pledged to eliminate the export tax on corn and wheat, while reducing it 5 percent for soybeans. With the dollar rising, this could swing export business to our competitors in the weeks ahead. Last week, soybean inspections were below the previous week at 68.1 MB. While they were nothing to sneeze at, this is the second week that the pace of shipments has fallen. As I mentioned in a previous comment, when shipments peak, they fall on average 85 percent by the time the marketing season ends with the range being 64-95 percent. This suggests that weekly shipments could eventually slip to 13 MB or less in 2016. Looking at weather in South America, it has improved recently, which should advance the outlook for a record crop. In other developments, the funds trimmed 15 MB from their short position last week reducing it to 380 MB. Looking ahead, traders will keep their eye on growing conditions in South America, and to whether Argentina’s new president will keep his promise on reducing the export tax on grains.
Winter wheat planting is almost wrapped up at 96 percent complete. However, Texas lags at 83 percent done. The clock is winding down for them suggesting that they may have some acres that go unplanted. Fifty-three percent of the wheat crop is reported in good-to-excellent condition, up one point from last week, but below last year’s rating of 58 percent. Exports continue to be a sore spot with inspections last week a meager 9.9 MB. We must ship 15.5 MB on a weekly basis to reach USDA’s target of 800 MB. If the current pace continues, shipments could fall 150 MB below their projection. Keep in mind that the election in Argentina will be to the detriment of U.S. exports. In other developments, the funds are piling on as they added 70 MB to their short position last week increasing it to 395 MB. While it is a sizeable position, there is room for it to grow.
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