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USDA cuts another 500,000 bales off export projections

Apr '07
The USDA cut another 500,000 bales off US export projections in their April report, raising ending stocks to a 22 year high of 9.2 million bales. However, the market reaction to the report itself was fairly muted as the numbers were widely expected. The real market feature this past week was of course the liquidation of the May contract prior to delivery's beginning on April 24th and the rolling of monstrous speculative positions from May to July. July open interest now exceeds the spot May.

Questions regarding vulnerability of carrying record open interest within the six week trading range were resolved with a technical break to the downside. The break triggered by the election of big speculative sell stops as locals and others jumped in front of the massive "Goldman" rolls.

The break this past week to new contract lows is believed to have sparked the best export offtake of the season. If that is the case it would explain the fact that even though the break contained the two largest volume sessions in history, May lost a relatively modest 154 points, July 165 points and Dec 115 points. Volatility picked up sharply in the popular July/Dec spread as demand for near by shipment picked up.

In other markets, gold had another good week picking up another $10 per ounce with silver gaining 35 cents. Wheat surged 21 to 34 cents on anticipation of freeze damage. A late week forecast for more of the same might have prevented even steeper loses on soybeans that lost 22 cents for the week. Corn vacillated back and forth as traders tried to guess the weather effects on plantings. However, much like cotton, much of corn's volume was fund rolling of positions.

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