On The Money Grain Commentary 2-5-15

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Corn Outlook:

A diamond in the rough was found in the corn market last week when the cattle inventory report showed the cattle herd rising one percent in 2014 to 89,800,000 head.  This was the first increase in herd expansion in eight years.  It is welcomed news for feed consumption as exports struggle.  On Tuesday, corn garnered support from crude oil setting an intermediate-term low, as well as a temporary top in the dollar.  This has, at least, temporarily stemmed corn’s decline.  The factor that has been overhanging the market the past couple of months is long liquidation by the funds.  Their position peaked in late December at 965 MB, and they have since fled.  Last week, the funds liquidated 105 MB reducing their longs to 585 MB.  In other developments, export inspections were 26.0 MB and below the average needed to reach USDA’s projection of 1.750 BB.

Bean Outlook:

      Soybean harvest is cranking up in South America with weather favorable for the crop that is still developing.  Record production is expected, although some analysts have lowered their previous estimates because of dry conditions in northern Brazil last month.  Meanwhile, the trend following funds became more aggressive in their short position last week, as they increased it 145 MB to 360 MB.  While it is not an overly large position, it is their largest short position since October.  The rebound in soybeans on Tuesday was largely from them lightening up on their shorts.  In other developments, export inspections last week totaled 62.3 MB with China taking 45.6 MB or 73 percent of shipments.  This is the second consecutive week that we have seen an uptick in the average pace of shipments.

Wheat Outlook:

The dollar appears to have established an intermediate-term top, but wheat is still overpriced in the world market.  This is reflected in exports, which are well behind the pace needed to reach USDA’s target of 925 MB.  Inspections last week were the highest seen in six weeks at 14.4 MB, but do not offer any bragging rights.  While gloom and doom has haunted wheat for over a month, the bears seemed to have noticed the fact of it being at its most oversold level since September.  This likely ignited Tuesday’s strong rebound.  In other developments, the trend following funds increased their short position 40 MB last week to 205 MB.  While not an overly large position, it is their largest short position since November.

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