The corn market closed lower on Wednesday on the back of a huge US corn crop and the lack of any positive fundamental news. After reaching new highs earlier this week, corn has set back with the prospect of a huge carry over number and the prospect of corn coming out of So. America in the winter/spring. A weaker wheat market isn't helping corn either. With the lack of any news, traders also pointed to lower outside market as helping to push corn a little lower. The corn market just seemed to lack direction. We are starting to see some spreading as traders and funds move their positions out of the Dec07 contract into the March and Dec08 contracts. As we mentioned yesterday, So. Korea bought 45,000 of non-GMO corn from the US or So. America. This is significant because they aren't buying this corn at cheaper prices from China. This probably shows that China doesn't have any corn to sell. Weather remains a small factor here in the US, but rains over the next 7-10 days will delay harvest.
eCBOT markets were stronger overnight as the December contract traded and closed through an important technical level. Very little news out overnight, but some traders will point to the rains across most of the Midwest the next 5-7 days as delaying harvest and helping support prices. US$ weaker overnight actually making 30yr lows against a basket up foreign currencies which should help US exports and thus support grain prices. Weekly export sales this morning were once again bigger than expectations. Estimates were for 900,000 to 1.1 mil and the actual weekly sales were 1.85 mil. This will be positive to the corn market and coupled with the lower dollar and higher outside markets, corn should open higher and we will see if we get traders willing to step out and sell the rally. Overnight, French analyst Strategie Grains cut its maize forecast for the 6th time in a row, down about 15% from last year. The weather forecast for So. America remains very conducive for crops as both Brazil and Argentina seem to have a good mix of sun and rain. There is very little news out in corn to push it one way or the other, so traders will look to other markets and technicals for leadership. Wheat is probably the weak sister of the grain complex, so look for beans to try and drag the grain complex higher. We still fee corn is in a range trade and will have trouble breaking out one way or the other.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 362^2 4^2 363^0 356^4
ZCH8 379^4 5^0 379^6 373^4
ZCK8 389^4 4^4 389^4 385^0
ZCN8 398^0 4^4 398^4 393^0
Early Opening Calls: higher
Top News
**USDA Corn 07/08 Export Sales Net: 1.851 mln mt; 08/09 Net: 5,000 mt; expected 900k-1.1 mln
-- Strategie Grains: Corn production lowered -1% from previous estimate to 45.7 mil tons - Eastern European drought to blame for the decline
-- Argentina's 07/08 corn planting intentions total 9.9 million acres, edging up slightly from previous reports, acc. to Ag Ministry
-- Major ethanol power VeraSun has suspended construction of a biorefinery in Indiana, acc. to a company statement
-- Poet reiterates "no retreat" stance on biofuels - no plans to curtail production, despite lack of profitability, amid reports of cancelled expansion plans, facility mothballing by some producers
-- October cattle on feed report will be released on Friday, early sample of analysts see On-Feed at 94-97% of year ago numbers, while Marketings during Sept were in a range of 94-98 & placement of animals on feedlots ranged at 102-112% of year ago figures.
-- Merrill Lynch analyst, Francisco Blanch, is bullish on ag commodity price gains over the next 12 months, suggests ag commodity price rises will eclipse energy & metals price gains, as supply of ag commodities will not keep pace with global demand.
-- Dalian Corn futures 8 Yuan/mt lower in overnight trade.
-- eCBOT Corn Vol: 101,785; Pit Vol.: 27,676; Open Interest change: +162
-- Weather: Normal to Below Temps. Normal to Below Precip. Corn Belt will see showers and thunderstorms today
-- Outside markets. Energy: crude higher, products higher ; Gold & Silver: both higher; US $ lower vs. Euro & Yen.
Cash Markets
-- CIF Corn up 1- 2. Oct. +60 to +62, Nov. +64 to +66, Dec. +64 to +66, Jan. +52 to +54, Feb. +50 to +53, Mar. +50 to +53, A/M +40 to +43
TREND:
CZ should spend some time between 3.40 and 3.65. Trade it as such. If I am wrong, could extend the gains a little more. Spreads are near 90 pct of full carry to the March and May. Take advantage and roll hedges forward.
Wheat is a dead duck. Do not look for much rally potential here. Look for WZ to test 7.50 quickly. Pricing will make this a choppy down side trade with small selling opportunities. Barring a surprise from Morocco tomorrow, expect the wheat trade to be pressed pretty hard by the local crowd. Suspect they smell blood.
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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