December corn futures closed lower on Monday on light consolidation trade and a weaker crude oil market. Crude oil was lower early in the day but then rallied higher only to finish down almost $1.50 at the end of the day. Corn opened lower but was able to recover as soybeans and wheat came back right after the opening and traded higher most of the day. Technically, corn traded an inside day within Friday's trading range and found little reason to rally as it got up toward break even. Besides the weaker crude market, there was light wheat/corn spreading that helped to keep a lid on any attempt to rally corn. The corn market did see stronger near-term demand with the USDA announcing Egypt and So. Korea were in buying US corn. Import inspections were 56.724 mil bu. which was well above analyst estimates of 35.0 to 40.0 mil bu. Volume was light and funds were net buyers of maybe 1,000 contracts on the day. The demand for ethanol is picking up as many refiners are starting to blend more than ethanol. An increase for ethanol will help support the corn market. Traders looking forward to the USDA crop production report that will be released on Friday.
eCBOT market was higher overnight as it seems the outside markets are once again selling the US$ and buying the commodity markets. The December contract closed almost 4 cents higher overnight as the outside market rallied and the USDA showed harvest was almost completed at 86% and with excellent weather last weekend, it should be almost completely done by next weeks report. In the western belt where harvest had been lagging, IA and NE both made big strides and are now actually ahead of last year. The USDA crop progress report showed, 86% harvested vs. 79% last year and 80% 5yr average. On the outside markets, crude was up almost $2 overnight and gold was up another $10 which help lend support to the corn market. With harvest wrapping up, that will take off some pressure off the corn market and could point to higher corn. Beans are the leader of the grain complex and will help give direction to the other grain markets. Look for corn to open higher today, but it should have trouble rallying unless the investment funds are in the grain markets to support it. Weather remains decent for So. America and conducive for growing.
USDA releases weekly export sales on Thursday morning and the November Crop Report on Friday morning. Both reports are released before the opening.
The CME Group announced that the mini-grain contracts will now trade electronically side-by-side during the day with the trading pit which offers an excellent tool for small traders and hedgers. The CME Group will have market makers in these markets to help support these markets.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 379^0 3^6 379^4 374^2
ZCH8 396^2 3^6 396^4 391^4
ZCK8 406^0 3^2 406^0 401^6
ZCN8 415^4 3^2 416^0 411^2
Early Opening Calls: 3-4 higher
Top News
-- 40,100 mt of US Corn bought by Taiwan in overnight tender, acc. to traders
-- Corn harvest in latest week rose to 86% complete vs. the year ago 79% pace & 5 yr avg pace of 80% complete.
-- Monday's Corn Export Inspections: 56.724 mln mt; expected 37.5 mln mt
-- Friday is USDA's Crop Production & World Ag Supply/Demand report.
-- CBOT Nov Ethanol Delivery: 1 contract
-- Dalian Corn futures finished 10 Yuan/mt higher to 1763 Yuan/mt on volume of 816,994 contracts traded basis the May futures
-- eCBOT Corn Vol: 129,033; Pit Vol.: 33,574; Open Interest change: +797
-- Weather: 6-10 Day Forecast: Above Normal Temps. Normal to Above Precip. The Corn Belt looks dry today and Wednesday.
-- Outside markets. Energy: Dec crude +$2.26/bbl to $96.21/bbl, setting new high at 96.44 in morning electronic session, products follow suit ; Gold $12.30 higher & Silver: up 37c to $15.16; US $ lower vs. Euro, slightly higher vs. Yen basis Dec futures.
Cash Markets
--CIF Corn up 1 to 2. Nov. +58 to +60, LH Nov. +60 to +62, Dec. +63 to +64, Jan. +51 to +52, Feb. +50 to +53, Mar. +50 to +52, A/M +40 to +43
TREND:
Basis levels continue to firm for corn all around the market. Domestic industrial and feed users appear to lead the gains. This is typical post harvest activity but it is adding a positive element to the flat price as well. Market appears well supported on small breaks. There is not enough short in the market to create much excitement on "good" trades. Not sure where this leaves the market. Overbot and due a correction but do not feel it will be deep? US corn continues to compete well with all alternative sources or alternative feedstuffs. The world seems bent on growing more meat protein for consumers so feed interest remains very strong in China and other areas?
Wheat spreads started to scare the short on Fri and continued to wash a few out today. The index fund bear spreading expected got a little more active late setting the spreads back on their ear a little. Look for the KC/Chi spreads to continue to show promise. Fade the gains in the Chi spreads that showed today.
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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