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When you get into this time of the year, trading volume diminishes because of the holidays with traders squaring positions prior to year end. This can be trying to one’s patience as unexplainable price swings can occur because of the lack of liquidity. For the past several weeks, the corn market has been underpinned from expectations of a smaller crop in South America and fewer acres likely to be planted in the Midwest next spring. On the flipside, overhanging values is a record crop held in storage with delivery beginning in January. In the December Supply-Demand report, 2014-15 ending stocks were lowered 10 MB to 1.998 BB. There has been a slight uptick in the export pace recently, but inspections last week were mediocre at 20.9 MB. In other developments, the trend following funds have lightened their long position by 40 MB, but is still hefty at 705 MB.
Soybeans have been underpinned from strong exports, along with news that Chinese delegates are coming to the U.S. next week to sign an agreement to purchase an unspecified amount of soybeans. However, the market met a headwind Wednesday following the supply-demand report after it showed the USDA raising exports 40 MB resulting in 2014-15 ending stocks being lowered to 410 MB. Export inspections last week were a robust 80.9 MB with China taking 48.4 MB or nearly 60 percent of shipments. However, the pace of shipments peaked a couple of weeks ago and has fallen nearly 10 percent. Historically, exports tend to peak by late November when China looks more to South America in booking their needs. Currently, weather in Argentina and Brazil is benign with the prospect for a record crop in the making. Last week, the trend following funds added 110 MB to their short position increasing it to 125 MB.
For several weeks, dry conditions in Ukraine and Russia has led to speculation that Russia might restrict exports. However, the market’s enthusiasm was tempered early this week by expectations that there will be no restrictions. In the supply-demand report, 2014-15 ending stocks rose 10 MB to 654 MB. Export inspections were meager last week at 9.8 MB and are making little headway from the dollar being at a five year high. In other developments, the trend following funds increased their short position slightly to 185 MB.
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