On The Money Grain Commentary 12-3-15

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Corn Outlook:

Trying to find pertinent news in the grains between Thanksgiving and Christmas is quite often like searching for a needle in a haystack.  This season may not be much different.  However, with the current geopolitical environment, it is not a time to stand around counting butterflies!  Looking more in depth at corn, the EPA has set the RFS ethanol mandate in 2016 to rise 0.5 billion gallons to 14.5 billion.  While this is supportive, it is countered by exports moving at a snail’s pace because of the up trend in the dollar.  Inspections last week were a paltry 11.7 MB.  We are three months into the marketing year, and need to ship 39.3 MB each week to reach USDA’s projection of 1.8 BB.  At the current rate, they will fall well short of their target.  In other developments, the funds maintain a bearish stance as they increased their short position 55 MB last week to 750 MB.

Bean Outlook:

Soybeans have gotten a boost recently from Argentina’s newly elected president announcing that the export tax for corn and wheat will be eliminated, while being reduced 5 percent to 30 percent for soybeans.  This will likely increase producer sales over the short run but means that more soybean acres will go to corn and wheat in the next crop year.  In the meantime, weather remains generally favorable in South America, which advances the outlook for a record crop.  Exports continue to be robust with inspections last week at 67.4 MB.  However, the pace of shipments peaked in early November and have fallen 19 percent.  As I mentioned in a previous comment, when exports peak, they fall on average 85 percent before the marketing year ends.  In other developments, the funds added 35 MB to their short position last week increasing it to 415 MB.  This is their largest position since September 2014, and could lead to a bout of short covering.

Wheat Outlook:

There is not a lot that can be said about wheat other than domestic and global stocks are abundant.  Last week, the rating for winter wheat improved 2 percent to 55 percent of the crop in good-to-excellent condition.  This compares to a rating of 58 percent a year ago.  We are nearly mid way through the marketing year, and exports continue to stink because of the up trend in the dollar.  Inspections last week were a meager 10.1 MB, and must average 15.7 MB each week to reach USDA’s projection of 800 MB.  We are way off that mark meaning that a reduction in their target will be forthcoming.  Meanwhile, the market posted a double digit gain Thursday because of a hard break in the greenback.   In other developments, the funds added 25 MB to their short position last week increasing it to 420 MB.

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