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In October, corn rose nearly 20 percent in value on the coattail of fund buying. This continued through last week with the trend following funds increasing their longs 130 MB to 420 MB. This is their largest long position since June. However, their buying spree will likely weigh on prices as we enter the latter stage of harvest and storage becomes tight. Last week, 65 percent of the corn crop had been harvested compared to the average of 73 percent. Wisconsin and Michigan are lagging at 25 percent and 20 percent below their average. While a record crop is expected, some producers are backing off from earlier estimates. Meanwhile, export inspections were a marketing year low at 16.7 MB. With the dollar at its loftiest level since 2010, U.S. corn is the most expensive on the planet to foreign users.
Like corn, soybeans rose nearly 16 percent in October from fund buying. In late September, the trend following funds were sporting a short position of 435 MB. Since then, they have liquidated 310 MB reducing their position to 110 MB. Last week, they covered 145 MB alone. Their short liquidation was the factor behind the strength in prices last month in light of bearish fundamentals, and expectations for a record crop. However, their short covering have run its course based upon the sell-off earlier this week. Conditions in Brazil were dry until a couple of weeks ago, but timely rains are occurring alleviating concerns. Meanwhile, Midwest harvest is in the home stretch at 83 percent complete, which is on par with the average. Exports have been sensational recently with inspections last week a record 101.8 MB. Currently, they are running 117 percent ahead of a year ago. However, once South America’s crop is planted, look for them to cool off.
Wheat trended upward in October on ideas that global production may not be as high as expected earlier because of dryness in the Black Sea region. In addition, cold temperatures in eastern Europe raised concerns of winterkill. Meanwhile, this is old news evident from this week’s decline. Planting in the U.S. is wrapping up at 90 percent complete compared to the average of 89 percent. Fifty-nine percent of the crop is rated in good-to-excellent condition versus 63 percent a year ago. The strength in the dollar is taking its toll on exports as inspections last week were a marketing year low at 7.6 MB. Unless there is a stark improvement in the weeks ahead, the USDA will have to back off from their projection of 925 MB. In other developments, the trend following funds reduced their short position 55 MB last week to 285 MB. In April, they were short 450 MB.
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