On The Money Grain Commentary 5-14-15

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Corn Outlook:

Our first look at 2015-16 ending stocks of corn has the USDA putting them at 1.746 BB with production of 13.630 BB.  They are using their yield estimate of 166.8 bpa in the February Outlook Forum.  World stocks were down 600,000 tons to 191.9  million.  What this report accomplishes is that it gives traders a starting point to base decisions and project “what if scenarios.”  Tremendous progress has been made in planting with 75 percent of the crop in the ground, up from 55 percent a week ago and the average of 57 percent.  Going forward, the crop now rests in the hands of Mother Nature.  Be aware that the trend following funds are holding a record short position for this time of the year at 790 MB.  This leaves a narrow exit should weather go awry during the growing season.

Bean Outlook:

In their first estimate of the season, USDA projects 2015-16 ending stocks of soybeans at 500 MB with production at 3.850 BB.  Traders were expecting ending stocks closer to 438 MB.  USDA is using their yield estimate of 46.0 bpa in the February Forum.  World ending stocks jumped 10.7 million tons to 96.2 million.  Prices challenged an area of important support following the report.  Planting is moving along briskly and is 31 percent done, up from 13 percent last week and the average of 20 percent.  For the past couple of months, the soybean market has been resilient in light of a record crop in South America and expectations for increased plantings in the Midwest.  This largely stemmed from the trend following funds reducing their short futures from 390 MB in February to 120 MB last week.  However, with the rapid progress in planting and sharp increase in global stocks, look for them to rebuild their shorts.  In addition, the spreading of bird flu will offer resistance.

Wheat Outlook:

USDA projects all winter wheat production for 2015-16 at 2.087 BB with ending stocks of 793 BB.  World ending stocks rose 2.3 million tons to 203.3 million.  Last week, the crop rating improved one to 44 percent in good-to-excellent condition.  This compares to 30 percent a year ago.  Spring wheat seeding is winding down at 87 percent, well ahead of the average of 51 percent.  Thursday’s sharp rebound in wheat was generated by fund short covering.  Be aware that the boat is overcrowded with bears, as the trend following funds are short a record 555 MB.  This may offer underlying strength short-term.

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