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Traders were expecting the corn ratings to improve 1-2 points this week, but they remained unchanged at 74 percent of the crop in good-to-excellent condition. According to Ag Watch’s yield model, this equates to a yield of 169.3 bpa compared to the record set a year ago at 171.0 bpa. The crop is off to a good start and traders have high expectations. However, weather has been on a roller coaster this spring with some areas being too cool and wet, and others dry. This may impact the ratings down the road. This was the case in 2012 and 2006 when the ratings began in the 70’s and went downhill afterward. In the meantime, the trend following funds shed 20 MB from their short position last week reducing it to 865 MB. Export inspections were routine at 38.4 MB and below the average needed to reach USDA’s projection of 1.825 BB.
The bears took a breather early this week as prices rebounded from short covering caused by the break in the dollar. However, look for them to return as the crop is being planted in a timely manner and record South American stocks overhang. Planting is moving along at 71 percent complete, up from 61 percent the previous week and is on par with the average of 70 percent. Meanwhile, because of wet conditions, Kansas and Missouri are running 42 percent and 34 percent below their average. Export inspections were a marketing year low at 2.6 MB, but the pace of shipments remains on track to reach USDA’s target of 1.8 BB. The trend following funds piled on 60 MB to their short position last week increasing it to a record 465 MB. Although the fundamentals are decidedly bearish, the extreme size of their position leaves the market vulnerable to spikes, such as the one seen Tuesday.
Wheat rebounded this week because of the decline in the dollar and quality concerns. However, the long-term uptrend in the dollar remains intact and inhibits the U.S.’s competitiveness in the world market. Last week, the trend following funds added 70 MB to their short position increasing it 495 MB. This is short of the record set in early May at 555 MB. The sheer size of their position leaves the market vulnerable to sharp recoveries, such as the one seen this week. Currently, 44 percent of the wheat crop is rated in good-to-excellent condition, down one point from last week. Meanwhile, the ratings in spring wheat rose 2 points to 71 percent in the good-to-excellent category. Export inspections last week were a nonevent at 13.2 MB.
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