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Grain futures have no story to tell until the crop report in August. At that time, results from a field survey will give traders a better handle regarding yield. In the meantime, weather in the Midwest is mostly benign coupled with stable growing conditions. Last week, the crop rating for corn was unchanged for the third consecutive week at 69 percent in good-to-excellent condition. This compares to a rating of 76 percent a year ago. According to Ag Watch’s yield model, the national yield is 164.6 bpa versus USDA’s current estimate of 166.8 bpa. Export inspections were 45.7 MB and below the average of 51.8 MB needed each week to reach USDA’s target of 1.850 BB. Last week, the trend following funds added 250 MB to their long corn position increasing it to 695 MB. Longs established since early July are currently underwater posing a threat to liquidation.
Soybean futures are in a flux because of opposing forces from China’s struggling economy, benign weather in the Midwest, and uncertainty regarding lost acres because of spring flooding in the Midwest. The acreage issue will be addressed in next month’s crop report. In the meantime, the crop ratings are showing signs of stabilizing. Last week, sixty-two percent of the crop was rated in good-to-excellent condition, unchanged from the previous week. This was the first time since early June that the ratings did not decline. A year ago, the rating stood at 73 percent. According to Ag Watch’s yield model, the national average is 45.1 bpa compared to USDA’s current estimate of 46.0 bpa. Export inspections were better than expected at 11.2 MB and above the average needed to reach USDA’s projection of 1.825 BB. Last week, the trend following funds added 60 MB to their long position increasing it to 400 MB. Unless a crop issue surfaces within the next few weeks, or the August Crop Report is bullish, the chances are that they will trim back their longs.
Wheat continues to butt heads with surplus stocks, sluggish exports, and strength in the dollar. Last week, export inspections were a marketing year high at 17.9 MB, but still below the average of 19.1 MB needed per week to reach USDA’s target of 950 MB. Harvest is progressing at 75 percent complete compared to 65 percent a week ago and 74 percent for the average. However, Michigan, Ohio, and Indiana continue to have problems, and are running 51 percent, 35 percent, and 23 percent below their average. After two weeks of reducing their shorts, the trend following funds added 20 MB to their position last week increasing it to 60 MB. Look for wheat to be a follower of corn and soybeans with the rising dollar curtailing any gains.
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