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It has been a week since the USDA shocked the Ag world with their forecast of 93.6 million acres of corn planted in 2016. However, if you step back and look at the big picture, their estimate will probably be lower in the June report. Shortly after the survey was taken in early March, a fund buying spree sparked an 8 percent gain in soybean values compared to 5 percent for corn. This likely bought a few soybean acres. In addition, it has been wet in the Southeast this spring, which will lead to some switching of corn to soybeans. Meanwhile, there was a bright spot in corn last week as export inspections were a marketing year high of 41.4 MB. This was slightly short of the average shipment of 41.8 MB needed to reach USDA’s target of 1.650 MB. In other developments, the fund lightened their short position 235 MB to 710 MB.
For nearly a month, the funds have been on a buying spree in soybeans. In early March, they were short a record 675 MB. They have since flipped their position and are currently long 200 MB. Last week alone, they bought 120 MB. This may be a difficult position to sustain as exports are turning to South America. Inspections last week were down sharply at 7.5 MB. This was the smallest number seen since mid September. In the meantime, exports are ramping up in Brazil. Each day, about 50,000 tons of soybeans are headed from Mato Grosso to the Port of Santos. This equates to 1400 trucks per day, or enough soybeans to load one ocean vessel. Long story short, in order to support the funds addition to soybeans, a steady dose of bullish news is needed.
Although wheat acres are projected to be down 5.1 million from a year ago, and limited moisture is forecast in the southern Plains next week, the market has been unable to break out of its month long trading range. This is because of the decline in corn values and expectations that global wheat stocks will remain high through next year. Meanwhile, exports remain lethargic with inspections last week at 11.6 MB. We need to ship 17.4 MB each week for the next nine weeks to reach USDA’s target of 775 MB. In other developments, the funds trimmed their short position 35 MB last week to 605 MB.
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