The corn market moved higher on Monday on the back of the liquidation of the wheat/corn spread and word out of the EU that they many allow importing of GMO corn. The long wheat/short corn spread has been a huge spread for traders both on and off the floor and as wheat breaks down, we are seeing the liquidation of this spread which is helping to support the corn market. The EU rumor on the surface looks very positive for US corn, but it may not be as the US has many different varieties of GMO corn and it is all mixed together by the elevator. The EU will only be approving 3 varieties of GMO corn. Many traders feel this story doesn't have any legs, but it may open the door for some corn by-products and such. Volume was light/moderate and funds bot 7,000+ contracts by the end of the session.
eCBOT market was a little lower overnight after a rally the last 2 days has pushed corn into new recent highs. There is very little new news out overnight. China's Ag minister told reporters today that China is likely to have a bumper crop this year even with some drought damage to the northeast part of the country. He said they expect to harvest 500 mln mmt of grain. USDA reported that 53% of the crop was harvested as of Sunday which is above last year and the 5 yr average. Harvest looks good, but it looks like the weather could put a damper over the next 7-10 days as rain is forecast across most of the Midwest. Some areas of the western belt which are already behind, may start to experience some stalk damage which could make corn fall to the ground and delay harvest even further. The crop is there, it just has to be harvested. Outside commodities are higher again this morning with crude making new highs and gold pushing higher. The downside in corn should be limited and corn should be supported by the liquidation of wheat/corn spreads and support of the outside markets. In other corn news, the Philippines plans to buy 200,000 metric tons of duty-free corn in a tender in late November for shipment early next year, a feed mill industry official said Tuesday. Corn futures on China's Dalian Commodities Exchange settled higher on speculative buying a trader said, with the May contract CNY10 higher at CNY1,661/ton.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 360^4 -1^4 362^0 359^2
ZCH8 377^2 -1^0 378^4 376^0
ZCK8 386^6 -2^0 388^6 386^6
ZCN8 397^0 -0^4 397^6 395^4
Early Opening Calls: 1-2 lower
Top News
-- Harvested corn in Monday's USDA weekly crop progress report was pegged at 53%, 11 points ahead of prior week pace & 14% a head of year ago & 12% points ahead of 5 yr average harvest pace.
-- October cattle on feed report will be released on Friday, small early sample of analysts see On-Feed at 95-97% of year ago numbers, while Marketings during Sept were in a range of 95-97 & placement of animals on feedlots ranged at 105-111% of year ago figures.
-- Despite drought conditions in Northeast China, gov't official says China could harvest 500 mln mt of Grains this year.
-- Dalian Corn futures higher in overnight trade, +10 Yuan/mt.
-- eCBOT Vol: 106,344; Pit Vol.: 27,451; Open Interest change: +5,803
-- Weather: Normal to Below Temps. Normal to Below Precip. The Corn Belt will see chances of scattered showers and thunderstorms today into Friday.
-- Outside markets. Energy: crude futures makes new all time high overnight at $87.97/bbl ; Gold & Silver: both lower; US $ slightly higher vs. Euro, lower vs. Yen.
Cash Markets
--CIF Corn steady up 1 . Oct. +60 to +??, Nov. +63 to +65, Dec. +63 to +66, Jan. +51 to +?? J/F/M +51 to +54
TREND:
The inter-market spreading took CZ up to first major resistance at 3.60 to 3.65. It is time to be less positive to prices at these levels. The condition reports are not important to me but could be a catalyst for weaker trade tonight? Did a little more bull spreading in corn to roll short hedges forward to H, K, and N today.
Wheat is a dead duck. Do not look for much rally potential here. Starting to act more like a bear market with the inter-commodity and carry spreads looking more like a bear market. Look for WZ to test 7.50 quickly. Pricing will make this a choppy down side trade with small selling opportunities. The other side of this is the corn/wheat spread that also shows signs of wheat with more down side ahead.
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
Futures trading involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future trading results. Trading commentary and analysis is based on information taken from trade and statistical services, news services, and other sources which we believe to be reliable. We do NOT warrant that such information is accurate or complete, and it should NOT be relied upon as such. Our policy is to publish market research that is objective, clear, fair, and not misleading. Trading commentary and analysis reflects our good faith judgment at a specific time and is subject to change without notice. There is no assurance that the advice we give will result in profitable trades. All trading decisions will be made on a strictly unsolicited basis by the account holder.
