The corn market was lower on Wednesday on the back of the sell off in the wheat market and harvest pressure. The front month wheat contracts were down limit for the second day in a row as many traders feel the wheat market has finally found a top and now will come under pressure. The corn market, with little new news, felt the pressure from wheat and went lower late in the session after moving in a tight range early in the day. The corn market is also still trying to digest the huge US corn crop this year of a record 13.0+ billion crop. As the US finishes up harvest, there are huge piles of corn sitting on the ground and psychologically, it is hard to buy this market. This huge crop will act as an anchor on the corn market and probably prevent the corn market from rallying. Drier weather in the western Midwest should help them get a jump start on harvest as they have been way behind because of recent rains. The EU finally made it official that they would allow 4 kinds of GMO products into the country but this will have little affect on US corn as the US has 27 major hybrids being used and the cost of segregation and the risk your ship could be held up for inspection will make it difficult. Volume was light/moderate and funds sold 3,000+ contracts. There was some talk yesterday of relaxations in ethanol blend in the SE which could increase ethanol demand.
eCBOT market was higher overnight on little to no new news and traders pointed to further liquidation of wheat/corn spreads as helping to support the corn market. With wheat limit down yesterday for the 2nd half of the session, traders couldn't liquidate their long wheat/short corn trade, so we saw traders liquidate their positions overnight, helping to support the corn market. So. Korea announced they were passing on a tender to buy 110,000 tones of non-GMO corn because of high prices and the lack of bidders. Weekly export sales once again were higher than estimates, but not the huge numbers we have seen the last couple of weeks. Traders estimated export sales at 1.0 to 1.4 mil and actual sales were 1.54 mil. Weekly export sales are likely to lend support to the corn market today as the market is expected to open higher today. With the lack of new news, the corn market will probably also be supported by the outside markets as gold and crude are very strong overnight. We still corn is in a sideways range trade and it will take a significant, surprise news event to push corn out of its range. Interestingly, the market is starting to talk about how, historically, there is a pattern of lowering the crop in November when October projections are lower than September. Many respected analysts still think we will see a bigger US crop than the October estimates and in 2005, there was a bigger increase in the final production numbers. Look for corn to open higher, but I think it will have trouble going very far unless there is massive wheat/corn liquidation.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 361^0 4^4 361^2 356^2
ZCH8 378^0 4^4 378^0 373^0
ZCK8 388^0 4^4 388^0 383^2
ZCN8 395^2 3^2 395^2 391^4
Early Opening Calls: 3 to 4c higher
Top News
**USDA Corn 07/08 Export Sales Net: 1.545 mln mt; 08/09 Net: 1,200 mt; expected 1.0-1.3 mln
-- 110,000 mt non-GMO Corn tender by S Korea group passed on bids Thursday
-- Government sources indicate the Senate Ag Committee may complete its markup process on their version of the US farm bill by late Thursday
-- Chinese customs data shows Corn Exports in the Jan-Sept period at 4.531 mln mt a rise of 99% from same period year ago, meanwhile exports during the month of Sept were 384,063 mt
-- European Corn November futures in afternoon trade down 10.50 Euros/mt, to 194 Euros/mt on very light volume
-- Dalian Corn futures May contract off 7 Yuan/mt in overnight trade
-- eCBOT Corn Vol: 94,777; Pit Vol.: 20,424; Open Interest change: -3,005
-- Weather: Normal Temps. Normal to Below Precip. The Corn Belt will see scattered showers and thunderstorms today and Friday. Saturday into Monday looks dry.
-- Outside markets: Energy: crude $1.40 higher, products up also; Gold $5.30 higher & Silver 25c higher; US $ lower vs. Dec Euro futures, slightly higher vs. Dec Yen futures
Cash Markets
--CIF Corn steady up 2. Oct. +58 to +60, Nov. +62 to +63, Dec. +62 to +63, Jan. +52 to +54, Feb. +51 to +53, Mar. +50 to +52, A/M +41 to +43
TREND:
Corn is still in the range. Look for a test of 3.45 to 3.40 but do not press beyond that level. Corn spreads can still widen more but firming cash in the center of the Corn Belt is flashing warning signs. Goldman roll in early Nov will find plenty of cash guys opposite.
As said earlier-wheat is a dead duck. Breaking below the Oct low was there---even if it was done synthetically. The July contract also broke below the broad trading range. This market should build some down side momentum. Test of 7.50 to 7.25 expected in WZ. Note the KC market will tend to gain on Chi in this break. Corn/wheat spreads in all months are also showing wheat as the weak sister. Still lot of room for wheat to lose.
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.
