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The clock is about to stop on corn planting as preventative plant dates loom, and wet conditions are forecast through June 9th. Last week, record slow progress of 58 percent was reported compared to the average of 90 percent. Illinois, Indiana and South Dakota are running 60 percent, 63 percent, and 65 percent below their average. This is raising scuttlebutt that 5-7 million acres of corn may not get planted and that yields could be 170 bpa or less. One thing that should be remembered about weather driven markets is the worst scenario imagined causes overreaction. For the past 4 weeks, the funds have been covering short positions and have whittled them down to 610 MB. More unwinding is likely. Once it ends, a sharp reaction lower could occur. Looking at exports, inspections were better than expected at 43.2 MB, but below the average of 55.8 MB that need to be shipped each week to reach USDA’s projection of 2.3 BB.
The strength in soybeans is mostly on the coattail of the surge in corn. However, there are concerns that wet conditions may cut yield potential. Planting has been slow with 29 percent of the crop in the ground last week compared to the average of 66 percent. Most of the market’s strength can be attributed to short covering by the funds that stood at a record 840 MB a couple of weeks ago. Their position has since been reduced to 790 MB. Looking at exports, inspections last week were better than expected at 19.5 MB, but well short of the average of 38.3 MB that must be shipped each week to reach USDA’s target of 1.775 BB. With global stockpiles at a record, and the likelihood for acres being switched from corn, one must ask whether current values are justified.
Crop conditions in wheat have been stellar but they tumbled last week from too much rain. Currently, 61 percent of the winter wheat crop is rated in good-to-excellent condition, a drop of 5 percent from the previous week. While values have been underpinned from strength in corn, short covering by the funds have been a major factor. Three weeks ago, the funds were short 590 MB, but have since trimmed their position to 380 MB. Looking at exports, there is little to brag about as expectations were considered modest at 18.1 MB.
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