On The Money Grain Commentary 9-24-15

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Corn Outlook:

News in the grains and outside markets is generally sparse.  At the Fed meeting last week, interest rates were left unchanged.  Rates have not budged from near zero percent for nearly six years as the economy is too fragile.  Meanwhile, news in China continues to worsen as their PMI index has plummeted to a six year low.  In other developments, corn harvest is getting underway and is 10 percent complete versus the average of 15 percent.  Exceptional yields are being reported in the western Corn Belt, but vary in the east.  Sources in Brazil are projecting 2015-16 corn production to rise to 88.6 million tons compared to USDA’s forecast of 79.0 million.  Export inspections were mostly mundane at 28.9 MB.  Meanwhile, the trend following funds have flipped from being short 115 MB to a token long of 5 MB.  This may become a pattern during harvest.

Bean Outlook:

Traders are optimistic that a Chinese delegation visiting the U.S. this week will ink an agreement to take up to 3.0 million tons of soybean in 2015-16.  With a record crop expected to be planted Brazil, we need all the help that we can get in exports.  Sources in Brazil are forecasting soybean production to rise to 100.5 million tons versus USDA’s current estimate of 97.0 million.  Export inspections last week topped the previous two weeks at 18.4 MB, but must average 34.5 MB to reach USDA’s target of 1.725 MB.  In other developments, harvest is just beginning and is 7 percent done, which is par for the average.  Like corn, exceptional yields are being reported in the west, but lower in the east.  The trend following funds are turning more bearish as they added 30 MB to their short position last week increasing it to 205 MB.  Over the next few weeks, harvest in the U.S. and planting in South America will be the focus among traders.

 Wheat Outlook:

Wheat has recently been supported from dryness in Russia and possible frost damage in Australia.  Meanwhile, longer-term factors overhanging the market are a large domestic supply, and increased production in the EU and Black Sea region.  Export inspections last week were 22.2 MB with the pace improving the past couple of weeks.  However, that may soon end as the dollar is showing signs of strength and expected to rise 10-13 percent from current levels.  In other developments, planting is progressing without a glitch and is 19 percent complete compared to the average of 20 percent.  The trend following funds remain bearish, but recently reduced their short modestly to 420 MB.  There may be additional short covering if Russian and Australia remain dry.

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