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After a late start because of wet conditions, the wheels are beginning to roll in getting the corn crop planted. As of last week, 4 percent of the crop was in the ground, which is on par with the average. While the Southeast is running behind, Missouri and Kansas are 14 and 10 percent ahead of their average. In other developments, the USDA projects 2015-16 ending stocks of corn at 1.862 BB, up 25 MB from March. World stocks are projected at 208.9 million tons for an increase of 1.9 million. Export inspections were a marketing year high last week at 44.1 MB. While the export pace has improved over the past few weeks, we need to ship 41.6 MB on a weekly basis to meet USDA’s projection of 1.650 BB. This seems like a tall order to fulfill.
Soybeans have been on a rampage. Concerns have risen because of wet conditions in Argentina slowing harvest and possibly reducing yields. However, two other factors come to mind as well. One is that the gain in the Brazilian Real makes Brazil’s soybeans more expensive to users, primarily China. This should swing more business to the U.S, but the pace of shipments has not picked up. Inspections last week were modest at 14.2 MB with China barely on the screen. The other factor has been fund buying. The trend following funds are sporting a long position, but it is a token one compared to the index funds. They have been on a buying spree since early March. Be aware that this could be a currency play between the dollar and Brazilian Real. During this period, they have accumulated a long position of 770 MB, the largest since July 2012. The thing to remember is that the index funds tend to rebalance the weighting of their portfolio when one commodity outpaces the others and creates excessive exposure. That happened in 2012 resulting in the index funds dumping 220 MB, which lead to a 23 percent price decline. This week the USDA cut their 2015-16 ending stocks estimate 15 MB to 445 MB, but marginally increased world stocks to 79.0 million tons.
Wheat is mostly mimicking the movement in soybeans . The ratings fell 3 points last week to 56 percent of the crop in good-to-excellent condition. However, this is above last year’s rating of 42 percent. Earlier this week, the USDA increased the 2015-16 ending stocks estimate 10 MB to 976 MB. World stocks were raised 1.7 million to 239.3 million. Domestic stocks to usage are a record 50.0 percent. Export inspections were mundane at 12.4 percent and below the average of 18.0 MB needed each week to reach USDA’s projection of 775 MB. Although the dollar has been under pressure recently, the U.S. is being consistently bypassed for cheaper origin wheat.
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