Bulls are in a dither because the USDA raised exports by only 200 kb. They may have a point, as the math is certainly on that side. Last summer the estimate was 13.5 Mb, and the USDA has put more faith in actual shipments than sales figures. We have heard a few analysts with exports in the 16.0 Mb area (Rabo for one), and there are two things that support that actual sales and the current pace.
For world numbers, we noticed another round of back adjustments in world use. USDA raised 14/15 by 290k; 15/16 by 220k; 16/17 by 290k. Part of these adjustments came from going back 7 years in Brazil and Aust and pushing up use that was previously in the unaccounted column. The increase of 880kb in world use in the last 3 years was partially offset by a 400kb decrease this year, and a 240kb increase in production. The standout stat was the Brazil crop up 800kb.
Other than the export argument, the other numbers were benign. Now we can get back to the two seemingly perpetual issues W TX weather and weekly sales and shipments. Neither has changed. What has changed is that price is much higher than several months ago, reflecting demand and weather. Without knowing how either issue will resolve, we favor a timid short, via Puts. Grain balance sheets looked a shade friendly, but reaction was muted.
Momentum is positive, and seasonal is negative. Our bias is that the current move up from last week is the B leg of a large correction. Todays low reached the exact level of the 34 day avg, and a close below this would be first indication that the B leg high is in place. Open interest in the spot month has dropped from 134k at the price high and is 72k today. Total open interest has meandered from 270k to 278k since the market hit the high price.
As always, please use protective buy and sell stops when trading futures and options.
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