On The Money Grain Commentary 12-18-14

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Corn Outlook:

Corn futures remain underpinned from fund buying and news that China will accept imports of some DDG’s.  This has led to ideas that they may also boost their corn purchases.  However, let’s not rush to judge as the USDA recently raised their production estimate 1.5 million tons in the supply-demand report.  Last week, the trend following funds bought 150 MB of corn increasing their long position to 855 MB.  This may eventually fly back in the face of the bulls considering that ending stocks are pushing 2.0 BB.  While the technical structure of the market has improved, exports are struggling to reach USDA’s projection of 1.750 BB.  Inspections last week were 21.5 MB and below the average needed to reach their target.  Although the pace has improved since mid November, it will meet a strong headwind from the rising dollar.

Bean Outlook:

      News is circulating that the Chinese delegation visiting the U.S. this week has inked a deal to purchase over one million tons of soybeans.  This is a bit disappointing as traders were hoping for an agreement closer to four million tons.  Meanwhile, sales have been hot this marketing year, but are cooling off.  Inspections last week were 66.8 MB, which was less than last week, but above the average needed to reach USDA’s projection of 1.760 BB.  However, the pace of shipments has fallen nearly 22 percent since mid November.  Although shipments have peaked, USDA will likely have to raise their projection an additional 40 MB.  In other developments, weather in South America is benign, which favors the potential for a record crop.  The trend following funds did a flip flop last week reversing their short position of 125 MB to one of being long 15 MB.

Wheat Outlook:

Wheat continues to work higher from news circulating that Russia will limit exports to only four countries because of a smaller crop.  This is an attempt to keep food inflation under control as the ruble has imploded.  While traders are optimistic that this could lead to increased U.S. exports, it has not materialized, so far.  Bear in mind that there is no shortage of global stocks even with Russia curtailing exports.  Inspections last week were 14.1 MB and below the average needed to reach USDA’s target of 925 MB.  While there was a slight uptick in shipments, we have a lot of catching up to do to reach their projection.  Meanwhile, the trend following funds lightened their short position 50 MB last week reducing it to 135 MB.

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