On The Money Grain Commentary 12-17-15

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Corn Outlook:

Interest in the grains is winding down for the holidays as traders and the commercials wrap up the books for 2015.  Over the past couple of weeks, the funds have lightened their short position in corn.  Last week, they liquidated 105 MB reducing their shorts to 590 MB.  Meanwhile, exports have picked up recently with inspections last week totaling 22.3MB, the highest level seen since October.  While this is below the average shipment of 38.8 MB needed each week to reach USDA’s target of 1.750 BB, it is a step in the right direction.  However, the one-quarter point boost in interest rates by the Federal Reserve, and cheaper exports from Argentina in the weeks ahead will limit interest.  Going into 2016, traders will focus on weather in South America, exports, planting estimates, along with geopolitical events for a price direction.  It will be an interesting year.

Bean Outlook:

There is not a lot of fresh news in soybeans with prices meeting pressure from expectations for a record crop in South America, along with exports losing momentum.  Inspections last week were 49.3 MB, the lowest level seen since October.  Since peaking in November, shipments have fallen 31 percent.  A previous comment mentioned that they tend to fall, on average, 85 percent from their peak before the marketing season ends.  Weather in Brazil is mostly favorable, although areas in Mato Grossa would benefit from a shot of rain and cooler temperatures.  For the past two weeks, the funds have been unwinding short positions.  Last week, they liquidated 90 MB reducing their shorts to 260 MB.  Right now, the market is mostly void of fresh news and needs a dose of positive input to whet the bulls interest.

Wheat Outlook:

An item catching my attention in wheat is that commercial traders went long a modest 10 MB last week.  This is their first long position since 2005.  In the meantime, the funds are on the opposite side and have increased their shorts to 550 MB, which is shy of the record set in May of 555 MB.  The funds and commercials holding extreme opposite positions frequently triggers an increase in price volatility, and often indicates that an important low could be close at hand.  In other developments, export inspections last week were 15.9 MB, which is the first time since October that they have been above the average needed to reach USDA’s projection of 800 MB.  While this is definitely a plus, the one-quarter rise in interest rates and potential increase in exports from Argentina will keep a lid on U.S. business.

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