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Corn:
Corn harvest is just getting underway with another big crop headed down the pike. While it may not be as large as originally touted, there will be plenty of corn to go around with production forecast at 15.093 BB and ending stocks of 2.384 BB., the largest in over twenty years. Although the USDA trimmed their yield estimate to 174.4 bpa, it is still a record. For four consecutive weeks, the crop rating has held steady at 74 percent in good-to-excellent condition. According to Ag Watch’s yield model, this translates to a national yield of 171.6 bpa. Exports are getting off to a solid start for the new marketing year with inspections last week at 52.9 MB. It is a must for them to remain strong to chew through the record supply. Last week, the funds added 135 MB to their short position increasing it to 935 MB. For now, there seems little reason for them to cover.
Bean Outlook:
USDA’s yield projection of 50.6 bpa leaves us staring at record soybean production of 4.201 BB and ending stocks of 365 MB. With the crop rating remaining unchanged at 74 percent in good-to-excellent for the second week, Ag Watch’s yield model shows that the USDA could bump up their yield estimate to 50.8 bpa. One small positive note is that Brazil’s production for 2016-17 was lowered 2.0 million tons from August to 101.0 million. While China has been a strong buyer of soybeans, the USDA lowered their 2016-17 imports 1.0 million tons to 86 million. Export inspections last week were 34.8 MB with China taking 26.2 MB or 75 percent of shipments. This was the most that they had taken since July. The funds are less supportive as they trimmed 85 MB from their longs last week reducing them to 295 MB. Additional liquidation may be forthcoming.
Wheat Outlook:
While 2016-17 ending stocks of wheat are unchanged at 1.1 BB, USDA lowered world stocks 3.7 million tons to 249.1 million. While this is a positive step, the U.S. will continue to face strong export competition as shipments from Australia and the Black Sea region are expected to rise 3.0 million tons. Meanwhile, U.S. export inspections last week were a marketing year high of 26.4 MB. Winter wheat planting has just begun and is 6 percent complete compared to the average of 7 percent. According to a recent study by Ag Watch, plantings could fall 3.1-4.7 million acres because of low values. In the meantime, the funds are getting more aggressive in their bearish stance as they increased their short position 45 MB to 735 MB, which is 30 MB short of the record.
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