Volume was very light today as traders seemed to keep one eye on corn pit and one eye on the crude market as the December futures couldn't seem to hold the early gains and closed 1 ½ lower near the lows of the day. It is almost comical, but after the early rally in energies and metals couldn't hold, either could the grain markets. The early rally was also supported by a weak dollar as the US$ made fresh lows overnight/morning. Export activity from Turkey overnight also provided support and traders are very anxious to see what the weekly export sales look like tomorrow. Very little news out again today as traders wait for the release of the USDA report on Friday morning. Traders also pointed to profit taking after recent rallies and traders are trying to square their positions before the report. December corn made a new high since September, but couldn't hold it. Weather in So. America remains good as well as final harvest weather here in the US. Analysts are estimating a decline in corn production in the November report due to lower yields in the harvest northern areas. Average analyst estimate is 154.1 vs. 154.7 USDA released in the October report.
eCBOT market was a little higher overnight coming back some after yesterdays slight sell off. The December contract closed 2 higher overnight with the metals and crude oil coming back some after yesterday's sell off. Talking to grain traders yesterday, they said many are just spinning their wheels until the release of the USDA report tomorrow morning. Grains are moving on position squaring and investment dollars coming into commodities because of weaker equities and weaker US$. It looked to be a blow off low in the US$ yesterday, so be careful buying grains because of a weaker US$ because we could see a rally that without any positive news could hurt grain futures. Weekly export sales were 1.5+ mil which beat estimates of 650,000 to 900,000. These sales were expected with the announcements this week and should have little effect on the market this morning. Look for the corn market to open a little higher today as long as crude stays positive when the grains open. The US$ is a little higher today, but really not a factor right now. Corn should be a mostly 2 sided sideways trade today as traders look to position themselves for the USDA report tomorrow morning.
USDA November crop production estimate is 13.261 bil bu, 57 mil bu below the October estimate and ending stocks are estimated at 1.932 bil bu, below the October estimate of 1.997 bil bu. Yield is estimated at 154.1 bu per acre vs. the October estimate of 154.7 bu per acre.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 386^4 2^2 387^2 382^4
ZCH8 403^2 2^0 404^0 399^4
ZCK8 413^6 2^0 413^6 409^4
ZCN8 421^4 1^0 421^4 419^0
Early Opening Calls: 1-2 higher
Top News
**USDA Corn 07/08 Export Sales Net: 1.505 mln mt; 08/09 Net: 42,800 mt; expected 650k-900k
-- Argentine export duties on take effect immediately says country's economics minister, duties on soybeans rose to 35%, up 7.5%. Corn rose 5 points to 25%, while wheat rose to 28% from 20%.
-- Friday is USDA's Crop Production & World Ag Supply/Demand report.
-- Survey of analysts expect US Corn production in Friday's USDA report at 13.261 Bln down slightly from October's 13.318 & ending stocks of Corn 1.932 Bln bu.
-- Sales of fertilizer by the Canadian Potash Company will continue through the end of Feb 2008, but company officials say they're evaluating pricing & market conditions from March & beyond. The company did raise prices $50/ton in Jan & Feb for customers
--Ag ministry authorities in the Czech Republic left their '07 harvest projections unchanged from previous estimates, totaling 7 mil tons of corn
-- UN FAO: World Coarse Grain Production to increase +9.4% to 1.08 bil tons total; world wheat production only to rise +1.1%
-- Rampant growth in industry could lead to widespread food/water shortages in China & India sooner rather than later - possibly within 30 years, acc. to policy analysts
-- Starting Nov 9th, CME Group mini-size grain futures will trade from 6:30 p.m. to 6 a.m. and 9:30 a.m. to 1:45 p.m. Central time Sunday through Friday.
-- Dalian Corn futures fell 6 Yuan/mt to 1767 Yuan/mt.
-- eCBOT Corn Vol: 264,213; Pit Vol.: 91,323; Open Interest change: +10,039
-- Weather: 6-10 Day Forecast: Normal to Above Temps. Normal to Below Precip. The Corn Belt looks dry today into Saturday.
-- Outside markets: Energy complex: crude 38 c higher at $96.75, products higher too ; Gold $1.50 to $835/oz & Silver up 16.5c to $15.49/oz; US $ slightly higher vs. Yen & Euro basis the Dec futures.
Cash Markets
-- CIF Corn off 1. Nov. +57 to +58, LH Nov. +58 to +60, Dec. +60 to +62, Jan. +49 to +52, Feb. +50 to +52, Mar. +50 to +52, A/M +40 to +43
TREND:
The soy complex is still the leader on the grain floor, however, with the outside day down today in soybeans, one could expect to see at least an attempt at filling the gap left from yesterday's trade. We see this as a buying opportunity, but keep in mind, we have a report on Friday, and what comes from this report will most likely dictate price direction for the near term. The dollar seems to be bottoming out somewhat, but we do not see this market rebounding too much. We just look at this as an opportunity to take in some profits, and for those of you who have been using the dollar to be bullish grains, you may want to take this into consideration. The wheat market still looks to be the weakest of the grain markets, and after today's trade, the selling should continue tomorrow. Despite a fifteen cent move today, we continue to feel that being bear spread July/Dec in the wheat, is the right way to look at this market, with the potential of another 15-cent move or even more in the coming days.
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.
