The corn market closed higher on Tuesday on the back of the rally in the bean market. The December contract closed 2 ½ higher, but well off its highs. As one trader said after the close, there was nothing new in the corn market, it was all based on the rally in beans. Talk among traders yesterday was the USDA report was going to lower harvested bean acres and raise harvested corn acres and that was the main driver of the rally in the bean market. We kept hearing rumors from different sources that the USDA was going to reduce bean acres by 2 mil and raise corn acres by 1 mil. Traders also said the corn and beans were over sold last week and due a bounce. With the release of the USDA report on Friday morning, we are starting to see traders squaring positions to protect themselves from a surprise report. The average analyst estimate for Friday's report is 13.466 billion bushels above the 13.08 bil bu estimated in September and ending stocks of 1.965 billion bushels, above the USDA September estimate of 1.675 bil bu. Harvest weather remains very good and exports remain strong. Taiwan announced they would allow feed corn imports from China, but most traders said the announcement is moot because there just isn't that much for China to export. Volume was light/moderate and funds were net buyers of 5,000 by the end of the day.
eCBOT market was higher overnight as we saw the bean complex move higher, continuing the rally that started yesterday. The December corn closed 3 ½ higher with the November beans closing 17 higher overnight. USDA released the weekly crop progress report last night and it showed corn 42% harvested vs. 31% last week and 30% 5yr average. These numbers aren't a big surprise and should have little to know affect on today's market action. As we saw yesterday, even with the strong bean market, there were sellers in the corn when it got 8 cents higher. Very little reason to rally corn and there will probably need to be a big surprise in the USDA report on Friday to change most traders opinions on the corn market. The US is in the process of harvesting the largest corn crop in history and no matter how strong the exports are going to be this year, there is still a lot of corn available. The corn market should be higher this morning on the back of the soy complex, but we still feel the corn market will have trouble rallying very much. I don't feel anything has changed in the corn market and traders will be there to sell rally's and users will be there to support the breaks. Traders will begin to square positions in front of the USDA report released before the opening on Friday.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 346^0 3^4 347^0 343^2
ZCH8 362^4 3^0 363^0 359^4
ZCK8 372^4 3^2 372^6 370^0
ZCN8 382^4 4^0 382^4 378^4
Early Opening Calls: 2-4 higher
Top News
-- Friday USDA releases latest monthly crop supply/demand & world ag production figures. Analysts see corn production at 13.46 mln bu and a yield of 157.7 bu/ac. Carryout is estimated to be 1.959 bln bu.
-- Tender for 330,000 mt of Corn were passed by S Korea on Wednesday
-- The latest corn production estimates in the EU bloc see the total crop falling 15-17% on inclement weather - 45-46 mil tons of corn expected, acc. to trade groups
-- DDQ launches 100% capital protected ag commodity fund, acc. to a company statement - the organization is already running a protected general commodity fund
-- USDA corn latest weekly progress shows harvest pace was 42%, up from 31% seen last week & ahead of 5 yr avg of 30% complete. Good to excellent conditions remained unchanged from the prior week at 63%.
-- USDA Corn Export Inspections: 42.187 mln bu for weekending Oct 4
-- Dalian Corn futures were lower in overnight trade, May down 4 Yuan/mt
-- eCBOT Vol: 100,431; Pit Vol.: 20,398; Open Interest change: -207
-- Weather: Above Normal Temps. Below Precip East, Above Precip West.
-- Outside markets: Energy complex: crude & active month products higher ; Gold & Silver both higher; US $ lower vs. Euro, up against the Yen
Cash Markets
--CIF Corn steady up 2 . Oct. +56 to +??, LH Oct. +59 to +??, Nov. +63 to +??, Dec. +63 to +??, Jan. +50 to +51 J/F/M +50 to +51
TREND:
Euro corn and wheat market rebounded overnight gaining back most of what was lost yesterday and may have been instrumental in the early rally in US futures. Night session also saw very big spread trade in meal and oil covering almost all of the meal open interest and about half of the oil open interest. Spreads are at full carry but it is unusual to see this all cleared up in the night session and was assumed to point to potential business and a concern about firming basis affecting spread trade? This added to the bounce back in flat price.
The wheat market is starting to act like we had expected---gave a fairly good chance to sell the small rally today. Spreads also bounced slightly for a chance to get on board---this continues to be the short leg for grains.
The corn market bounced off the oversold conditions. The rally was slightly more aggressive than I expected? Sell an 11 cent rally back. The carries should continue to widen a bit.
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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