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Corn futures were body slammed by an 800-pound gorilla on Tuesday following the July 4th weekend as the bulls, who have been banking for a weather related rally this month, are seeing their chances fade away. Weather in most sections of the Midwest is forecast to be near ideal for the next two weeks. In addition, for the fifth consecutive week, 75 percent of the corn crop was rated in good-to-excellent condition, and offers the bulls little encouragement. According to Ag Watch’s yield model, this equates to a national yield of 173.2 bpa compared to USDA’s current estimate of 168.0 bpa. Export inspections were modest last week at 45.8 MB and below the average needed to reach USDA’s target of 1.825 BB. Right now the albatross hanging around the neck of corn is that the funds are long 925 MB. Anything held since early April is a loser!
The bulls were gored this week following the July 4th holiday with prices falling 12 percent in value as weather looks agreeable for the next couple of weeks. However, it could still be a factor late this month or early August. Last week, the crop rating fell 2 points to 70 percent in good-to-excellent condition, but remains well above the average of 63 percent. According to Ag Watch’s yield model, this translates to a national yield of 49.3 bpa compared to USDA’s current estimate of 46.7 bpa. Export inspections were mediocre at 7.0 MB and must average 15.8 MB each week to reach USDA’s projection of 1.760 BB. Last week, the funds lightened their longs by 25 MB reducing them to 940 MB. This is down from the peak of 1.075 BB in mid-June. If weather is non-threatening through early August, the size of their position will become a problem for the bulls.
Wheat continues to meet a strong headwind from an oversupply of global stocks, harvest pressure, and fund selling. Harvest is progressing smoothly at 58 percent complete compared to 50 percent a year ago and 55 percent for the average. The funds are becoming more aggressive as they increased their short position 90 MB last week to 540 MB. The one bright spot for wheat is that export inspections were 20.5 MB and above the average of 17.3 MB needed each week to reach USDA’s projection of 900 MB. Meanwhile, until harvest is complete, the bulls are unlikely to show much interest in wheat.
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