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This is a week that traders and grain producers would like to forget. Trading was volatile in the grains stemming from China’s devaluation of the yuan, which makes U.S. products more expensive, along with the USDA unloading an unbelievably bearish crop report. Traders were in absolute shock by the USDA raising their yield estimate 2.0 bpa to 168.8 bpa. Most were looking for a reduction because of the variability in weather this spring. As a result of the increase, production was reported at 13.6 BB with 2015-16 ending stocks of 1.772 BB. With global stocks growing 2.7 percent to 195.0 million tons, it just became more of a buyers market. In other news, export inspections offered no bragging rights at 31.6 MB. Coming into this week, the trend following funds were long 520 MB, which means additional liquidation is likely because of the report.
Traders jaws dropped when the USDA raised their yield estimate for soybeans 2.0 bpa to 46.9 bpa, as they were expecting a reduction. As a result of the increase, production was boosted to 3.9 BB with 2015-16 ending stocks climbing to 470 MB. The factor keeping a total collapse from happening was 5.4 percent decline in world stocks to 86.8 million tons. However, even with the decline, world stocks-to-usage at 28.0 percent are in the upper third of their twenty year range. The other factor putting traders on edge was China devaluing the yuan by 2.0 percent, which makes U.S. soybeans more expensive for them to import. In other developments, export inspections were meager at 5.5 MB, and below the average needed to reach USDA’s projection of 1.825 BB. At the end of last week, the trend following funds were long 125 MB, which has probably been liquidated. Right now, the question is, will they go short? Long story short, it was not a good week for soybeans.
It was not a good week for wheat, as it took a lot of flack from the decline in corn and soybeans. USDA raised their 2015-16 ending stocks estimate to 850 MB with world stocks rising to 221.5 million. Production in the Black Sea region rose 10.2 million tons meaning that the U.S. faces intense competition from that area. This is reflected in exports, as inspections last week were 13.4 MB. Although the dollar has declined recently, its longer-term trend is higher, which will add to wheat’s woes. Last week, the trend following funds increased their shorts in wheat by 80 MB to 230 MB.
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