Corn Commentary - Strikes Again
James Riley - 11/12/09 9:24am
The corn market closed about unchanged today as it couldn’t hold early gains and traded over $4. The December contract closed down ˝ near the lows of the day as it traded above the $4 level and couldn’t hold those gains for more than a couple of minutes. The market sold off and made lows before making a recovery near the end of the session but late selling took prices lower on the day. The outside markets were relatively quiet yesterday with crude, stocks and the US$ all closing slightly higher. Corn reached the highs of the day early in the session and remained under pressure throughout the day trading back and forth. With the lack of any new fundamental news and the outside markets mixed, we saw little direction in grains on Wednesday. The report on Tuesday was viewed as bullish because of the reduction of in yield and production, but the carry out number should not be considered bullish, but there is still a lot of assumptions in what final carryout will be at the end. The weather remains good for harvest through the weekend before most of the Midwest will be getting some rain that will stall harvest for a few days. The volume was huge yesterday at 461,000 contracts and funds were light buyers of 3,000 contracts.
Overnight, corn traded unchanged, slightly lower most of the night before selling off very early in the morning and closing significantly lower. The December contract closed about 8 cents lower which was actually off the lows last night. Weekly export sales are delayed until tomorrow because of the holiday yesterday. With the trading action yesterday and last night, it seems to further tell us that corn is in a trading range and you want to sell rally’s and buy breaks until proven wrong. The $4 psychological level in corn strikes again as the December contract traded over that level and immediately found sellers and couldn’t hold those gains. The question being asked by many traders/analysts is what can be done with $4 corn. The market seems to be telling us that nobody wants to own corn at that price level, but are willing to own it at slightly lower levels. The corn market should be under pressure this morning with the US$ higher and crude and stocks lower. We will see if the market finds any buying down at these levels or do we see continued presses because of harvest pressure we are seeing this week. We are hearing about elevators shutting down or closing early because of the extensive drying of wet corn. Corn will be called 6-8 lower, but the US$ has moved higher since grains closed, so we could see more pressure.
Globex Overnight Contract Last Net Change High Low Volume ZCZ9 386^0 -8^0 393^6 382^4 6706 ZCH10 401^0 -8^2 408^6 397^4 1497 ZCK10 411^6 -7^4 418^4 408^0 282 ZCN10 421^0 -6^6 427^0 420^4 118
Early Opening Calls: off 6-8 cents
Top News ** USDA Weekly Export Sales report will be released Friday, November 13, 2009, due to Veterans Holiday instead of its usual Thursday release. -- Strategie Grains lowers EU Corn crop to 56.2 mln mt a drop of 730,000 mt from the prior forecast on lower expectations of output from Hungary, Romania & France -- Argentine Grain Exchange leaves 2009/10 Corn area planted unchanged in latest report at 1.875 mln ha, same as last week -- While Soybean harvest had picked up in Argentina, Corn planting progress in weekly Buenos Aires exchange report shows it still behind last year's pace of 74.3% with most recent estimate at 69% complete -- Latest report by China's CGNOIC leaves 2009 Soybean production for that country unchanged at 14.5 mln mt from prior estimate. However its 6.7% lower than last year's crop -- Latest report by China's CGNOIC leaves 2009 corn production for that country at 163 mln mt -- Grain exports from the Ukraine are now expected by private forecaster at 17 mln mt, while the crop harvest was expected at 48 mln mt, compared to the 45 mln mt gov't expectations -- Private crop forecaster group in Australia says reduced output in key states of New South Wales, Western Australia from dry October & wet harvest period will bring 09/10 crop to 22.7 mln mt down 400,000 mt from prior forecast -- Higher German biofuel taxes hurt production at German based Verbio biofuel maker, they note Jan-Sep output fell by 12,000 mt to 288,000 mt in that period -- By the end of 2009, a $350 million agriculture fund to purchase 50,000 ha of Romanian farmland, hopes to be finalized by Miro Holdings of the UK & Pharos Group of United Arab Emirates -- Pending Tender: Japan's Ag Ministry also announced 100,000 mt SBS feed Barley tender, with bids due by Nov 18th -- Pending Tender: 45,000 mt of EU Corn was tender for by Israeli group on Tuesday, bids must be submitted by Nov 5th, they're also seeking 32,000 mt of US Corn in a separate tender also on Thursday Nov 5th -- Pending Tender: 10,000 mt of European Barley was tender for by Israeli group on Tuesday, bids must be submitted by Nov 5th -- Pending Tender: 10,000 mt of Feed Barley is being sought in Nov 4th tender by Oman, acc. to EU merchandisers. Delivery was expected Nov 20-Dec 5. -- Pending Tender: Turkey's state run grainary will hold a sales tender for up to 100,000 mt of feed Barley on November 12th -- EU Barley intervention stocks climbed 263,000 from German farmers in the latest week -- 100,000 mt Barley tender was concluded by Jordan on Thursday, for reported price of $185/mt CIF and of Black Sea origin, acc. to traders. 50k mt of the grain was for FH Jan shipment while the balance was for LH Jan -- Liffe Jan corn futures were off -0.50 euro at 134.50 euros/mt. -- Dalian Corn futures for May delivery fell 3 yuan in trade last night, ending the session at 1,751 yuan/mt. Other delivery months were mainly lower -- Globex Corn Vol: ; Pit Vol.: ; Open Interest change: -- Weather: 6-10 day Forecast: Above Normal Temps. Below Precip West, Above East -- Outside markets: Energy Complex -0.63 at $78.65; Gold & Silver: +0.4 at $1115.0 & -0.042 at $17.495; US $ +0.145 at $75.405
Cash Markets -- CIF Corn steady off 1. FH Nov. +52 to ??, Nov. +49 to +52, Dec. +53 to +56, Jan. +44 to +47, Feb. +44 to +47 ,Mar. +44 to +47, April +40 to +42, May +40 to +42, June +40 to +42, July +40 to +42
Interesting that the firming $US did not have much of a negative influence on gold, crude oil or equities today. Not sure the tie is broken but the $US does not have a lot of down side remaining. Support should surface at 74 to 74.50 so not willing to press. Came close to developing reversal trade that could bottom that market --- but not a currency trader here?
Corn has a reversal down from a test of 4.00 and Fib retracement levels. Has still broken out of the recent flag formation so will be interesting to see if it can hold. Look for a test of the 4.13 highs on the weekly chart. If we are able to break above that it may point to a change in the upside potential. The Z/H spreads are now within 1 cent of full carry. Time to roll short hedges forward even if on a scale
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.