The corn market was lower on Monday on the back of a limit down move in wheat and continued harvest pressure from a huge US corn crop, but rallied back almost 5 cents off the lows to close up near the high of the day. Traders also are looking at the US dollar as it was stronger yesterday making US exports a little more expensive. Most traders are in agreement that wheat is the leader of the grain complex pushing corn and beans down with it. There was some rains in the US that halted harvest late last week, but nothing very big and harvest resumed over the weekend. The expected huge corn crop is weighing on the market which is already under pressure. As expected, cash traders said they have seen steady basis levels and a reduction in farmer selling with these lower prices. Volume was pretty light yesterday at just 110,000 contracts and funds were net sellers of almost 5,000 contracts on the day. There was no release of crop progress yesterday because of the Columbus Day holiday so it will be released today after the close. Argentina corn sowing continues to be right on schedule if not a little ahead historically.
eCBOT market was unchanged overnight after closing in the middle of the trading range and just about the same price that the night session opened. Volume was pretty heavy for the night session, but the December only had a 4 cent range. Wheat continued to sell off last night down over 25 cents during the session only to rally back and go higher, but it closed a couple lower. With no new news in the corn market, it will be a follower and right now, it is going to probably follow the wheat or at least be part of the wheat trade. Many traders are using the corn market as the short leg of spreads, so when you see customers selling wheat, a lot of times those same traders are buying corn and vice versa. Overnight, Taiwan announced it had suspended a ban on feed corn from China, but Chinese officials said a shortage of corn feed would limit shipments. We had had another ethanol plant construction that was halted because of declining margins. I don't think anything has changed in the corn market, it is a range trade and it will have trouble rallying or selling off unless we get some new information. Corn yields continue to impress and traders are eagerly awaiting the release of the USDA crop report on Friday morning before the opening. Corn will have a mixed opening and look for leadership from either the wheat market or funds.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 339^4 -0^2 342^0 338^2
ZCH8 356^2 0^0 358^4 354^6
ZCK8 368^0 1^0 368^6 365^4
ZCN8 375^2 -0^2 377^4 374^2
Early Opening Calls: mixed
Top News
-- USDA will release Grain Export Inspections at 10:00 AM CDT, delayed a day due to Columbus Day holiday
-- USDA will release Crop Progress/Conditions report at 3:00 PM CDT, delayed a day due to Columbus Day holiday
-- Analyst expect no change to Chinese import quotas of Corn, Wheat, Cotton in 2008. Corn import quota during 2007 was 7.2 mln mt.
-- Import feed corn ban temporarily lifted by Taiwan to allow Chinese feed corn into their country to help ease price pressures. However, Chinese traders & analysts wonder if additional stocks are available for export.
-- Argentina Grain Exchange weekly survey shows 25% of acres have been sown with Corn as of Friday, up 10% points from prior week, but behind the 33% long term average
-- Argentina may be a suitable source of corn for Hungarian livestock producers, acc. to traders
-- Dalian Corn May futures 9 Yuan/mt higher in overnight trade.
-- eCBOT Vol: 78,083; Pit Vol.: 27,328; Open Interest change: -1,877
-- Weather: Above Normal Temps. Normal to Above Precip.
-- Outside markets. Energy: crude & products lower ; Gold & Silver: both lower; US $ sharply higher vs. Euro, higher vs. Yen.
Cash Markets
--CIF Corn steady. Oct. +56 to +59, LH Oct. +58 to +61, Nov. +61 to +64, Dec. +63 to +64, Jan. +49 to +51 J/F/M +49 to +52
TREND:
The corn market is getting very oversold and it showed that on the small reversal back to close at the days highs. This is not the market to press for the time being but sell an 11 cent rally back. The carries should continue to widen but a lot of the gravy is gone from this trade. Full carry in Z/H is 18 cents. Roll shorts forward this week at 17 or wider.
The wheat market is starting to act like we had expected---hard to jump on and starting to hear talk about how oversold it is. Spreads have supported the new crop until today when it started to get some selling along with the front months. Use a 15 cent rally off any interim low in WH to sell the market or be bear spread. We will add carries in this market. Z/H full carry is 25 cents and trading today at 12 to 13. Will go to near full carry. The N/Z8 is trading at a 15 cent carry off hard from near even money earlier this month. This spread will continue to widen with full carry closer to 30 cents.
If you have any questions, or if you would like to discuss specific trade recommendations on any markets, contact me directly.
Jim Riley
Linn Group
877-787-6278
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