The corn market closed higher on Thursday ahead of the USDA report this morning, but it did retreat off the highs as traders took profits from the recent run up. The December contract closed up about 4 cent which was 6 cents off the highs as it hit the $3.70 level again and retreated. It was mostly a quiet day as the market waits to see if the USDA makes any major changes this morning. The rally yesterday was helped by a continued weaker US$ which made contract lows, down almost 100 pts, but traded down about 50 pts most of the day. The weather picture also remains terrible for harvest as rains continue to fall across the heart of the corn belt, especially in areas that are already wet or were wet all spring and have immature crops. The cold weather is supposed to hit this weekend with some areas in the northern plains expected to get snow, but at the very least, a hard frost is supposed to reach down into most of the Midwest. The volume was good at 234,000 contracts and funds were buyers of app. 10,000 contracts.

Overnight, the corn market closed slightly higher ahead of the USDA report with the December contract closing up 1. The USDA reported production of 13.018 bil bu. with a yield of 164.2. These numbers are above the estimates of 12.993 and 162.7. The USDA also reduced planted acres from 87.0 to 86.4 and harvested from 80.1 to 79.3. The initial reaction to the numbers this morning is a lower opening. Traders/analysts are saying that if we hadn’t seen the run up that we have the last week, maybe the calls wouldn’t be lower. As I said yesterday, today’s close is more important than the opening. A lower opening today and then a rally back to close higher would go a long way to making this rally seem real. Truthfully, the report is a bummer for traders/analysts that were looking for a blockbuster report. The corn call this morning is lower with calls ranging from 5-15 lower depending on who you talk to and what their agenda is. The close today will be more important than the opening as a lower opening today that is met with buying and a higher close will be considered bullish. A lower opening that keeps going lower will bring back the short sellers that got chased out of the market this week.

Globex Overnight

Contract Last Net Change High Low Volume ZCZ9 365^0 1^0 365^6 360^6 5353 ZCH10 377^2 1^0 378^0 372^6 1242 ZCK10 386^0 1^2 386^0 381^6 149 ZCN10 393^4 1^2 393^4 388^4 352

Post Report Opening Calls: 5-10 lower

 

Top News -- Chinese grain stockpiles in gov't owned warehouses totaled 225.4 mln mt at the end of March 2009, acc. to China's Nat'l Development & Reform Commission. The audit was in response to questions about grainaries overstating their levels the audit found 99.7% of the grain compared to reported levels -- Saskatchewan weather cold wet conditions last week delayed harvest, 76% was complete compared to the year ago 80%. Anecdotal evidence from the report suggest farmers are worried about the condition of unharvested grain & oilseed -- Brazilian sugar industry pegs 09/10 cane sugar ethanol production through October 1 at 16.4 bln liters, slightly below last year's 17 bln liters produced in the same time period -- Pending Tender: Japan's Ag Ministry and floated an Oct 29th SBS tender for 31,700 mt of food grade Barley -- Pending Tender: 100,000 mt Barley export sale tender scheduled by Turkey on October 15th, acc. to the country's state news agency -- Pending Tender: Traders says 30,000 mt of optional origin Corn is being sought in a Wednesday tender floated by Algeria for shipment during November -- Pending Tender: 20,000 mt of non-GMO European Corn is set for an October 7 tender by private Israeli group. They're also seeking 10,000 mt of feed grade Barley. -- Liffe Nov corn futures were off -1.50 euro at 124.25 euros/mt. -- China domestic cash prices for corn were lower by 20 to 50 RMB across all locations. Users appear to await the coming harvest. -- Globex Corn Vol: 214,756; Pit Vol.: 14,118; Open Interest change: - 2,466 -- Weather: 6-10 day Forecast: Normal to Below Temps. Normal to Above Precip. -- Outside markets: Energy Complex -0.67 at $71.02; Gold & Silver: -6.9 at $1049.4 & -0.150 at $17.665; US $ +0.215 at $76.345

Cash Markets

CIF Corn steady up 4. Oct. +57 to +58, Nov. +57 to +58, Dec. +57 to +58, Jan. +48 to +51, Feb. +48 to +51 ,Mar. +48 to +51, April +44 to +4

TREND:

The fundamental picture does not allow this trader to turn bullish on a 60 cent rally in beans, 70 cents in corn, and 45 cent rally in wheat---but prudence should cause all to look at the trade as a wake up call. The news of big crops has been pretty well assimilated and the market was able to rally anyway.

Same can be said of corn. Market has rallied in a time of bearish indications but it only took a few hints of more positive news to cause the market to run in the shorts and cause some users to take on coverage. The tech signals are more positive and any sharp down on a big production est tomorrow could find short covering on any major down side move.

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 jriley@linngroup.com

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