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The playing field in corn is becoming overrun with bears as a large supply has been factored in for quite some time. Last week, the funds added 320 MB to their short position increasing it to a record 1.250 BB. This could lead to short covering if a new low is not made relatively soon. Meanwhile, the USDA made no changes in the March Supply-Demand Report leaving 2015-16 ending stocks at 1.837 BB. Global stocks fell 1.8 million tons to 207.0 million, which is more than an ample supply. Export inspections last week were 37.5 MB, but below the average of 41.2 MB needed to reach USDA’s target of 1.650 BB. Although this was the seventh straight week that they improved, they have a long way to go. Looking ahead, a shake up will probably be needed in the Planting Intentions Report later this month to change the bearish landscape.
Regardless of the fundamentals, any time the funds are short a record position before the crop is planted, they are burning the fuse at both ends. Last week, the funds added 265 MB to their shorts increasing them to a record 675 MB. While this does not imply a change in the price trend, it keeps the door open for short covering. Meanwhile, the USDA upped their 2015-16 ending stocks estimate 10 MB this week to 460 million tons. Global stocks fell 1.6 million tons to 78.9 million, but remain in oversupply. No changes were made to Argentina and Brazil’s production. Export inspections were routine at 39.2 MB with China taking 18.2 MB or 46 percent of shipments. Shipments are on track to reach USDA’s projection of 1.690 BB, but it will be a photo finish.
Not to be left out, the funds increased their short position in wheat to a record 750 MB last week. In the meantime, commercial traders increased their longs to 215 MB, just short of the record of 230 MB set in 2006. Rarely do you seem them at opposite extremes, but when it occurs, it can put a squeeze on the funds, which appears to be the case happening now. USDA left their 2015-16 ending stocks estimate unchanged at 966 MB, but lowered global stocks 1.3 million tons because of a reduction in Australia’s wheat crop. However, world stocks remain in oversupply. Export inspections were 16.2 MB last week, slightly below the average of 16.5 MB needed to reach USDA’s target of 775 MB.
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