Corn Commentary - Funds lead the way
James Riley - 12/16/09 8:36am
The corn market was slightly lower on Tuesday as continued weak demand, a stronger US$ and the recent rally all helped push corn lower. The March contract closed down 1 and we only had around a 5 cent trading range. It was a pretty quiet day, as one trader said, it seemed like most traders went home midday. The corn market has rallied almost 30 cents in the last couple of days, so it was probably due a quiet day. Keep in mind, corn didn’t really sell off, it just didn’t rally as the prospect of fund rebalancing looms over the next couple of weeks and the general thinking is they are going to be buying corn. On the export front, the USDA announced that Taiwan bot 120,000 mt of US corn on Tuesday. The volume on Tuesday was light again at only 130,000 contracts and funds were light sellers of 2,000+ contracts.
Overnight, the corn market closed slightly higher after trading lower early in the night session. The March contract closed up about 2 cents which was near the high of the night session and about 5 cents off the lows. The outside markets are relatively quiet this morning with stocks and crude slightly higher and the US$ lower. The beans were stronger yesterday before giving it up at the end of the day and that will help support corn for the time being as export sales remain excellent for soybeans. We continue to hear talk about index funds will be in the grain markets early next year to buy corn, beans and wheat to rebalance and that is what the market is betting on right now to support prices. Nobody wants to be short in front of possible fund buying regardless of what the fundamentals tell us. Also, we still need to get farther along in the growing season in South America before deciding that they have a good crop. From what we are hearing, there are some problem areas, but for the most part, they are getting the crop planted and they are receiving adequate moisture. Corn will be called to open a couple higher in line with the night session, but the path of least resistance seems to be higher. We are getting into holiday markets which usually means lighter volume and bigger market swings.
Contract Last Net Change High Low Volume ZCH10 409^4 2^0 410^0 404^2 5855 ZCK10 420^2 2^0 420^2 414^6 354 ZCN10 429^0 1^6 429^0 424^0 481 ZCU10 434^0 1^6 434^0 429^4 109
Early Opening Calls: 1-3 cents better
Top News -- S Korean feed maker passed on its announced 165,000 mt Corn tender & only purchased 2,000 mt of Barley for Jan delivery, acc. to traders. The barley was bought at reported $203.50/mt & said prices were too high for 165,000 mt of Corn -- In a Japanese SBS tender, the Ag Ministry purchased 25,000 mt of food grade Barley & 5,500 mt of barley for beer making. The purchases were nearly inline with announced volumes -- Retender announced for Dec 17th by Taiwan Sugar Corp for 23,000 mt of US Corn -- Director of Corn growers assoc in Buenos Aires says the group expects 14 mln mt of output next year up from their prior estimate of 12 mln mt on better yields after beneficial rains. This would be the 1st crop expansion since 2007 when drought hit the country for the past couple years. -- Prices for Corn, soybean & wheat are expected to average in 2010 $4.19/bu, $9.63/bu & $5.25/bu respectively, acc. to forecast by JPMorgan -- Beef exports shuttered as domestic prices in Argentina jump, reportedly the trade office in Argentina discontinued certificates for beef export today while industry officials expect the blockage to continue for 15 days to allow sufficient supply during the holiday season. -- North Carolina meat packer gets banned by Russian gov't from exporting to that country after antibiotic reportedly found in shipment by inspection team in Russia -- Beginning April 1, 2010 CME Group will shorten ethanol contract specs load out delivery time to 10 days from the current 17 days; will require lower max content of denaturant & require deliveries to match RFA guidelines -- Brazilian gov't report estimates 09/10 ethanol output at 25.9 bln L down 2.9 bln L from their Sept estimate, while ethanol from cane is expected to drop to 23.7 bln L from 25.7 bln L in Sept estimate -- Analysts note futures and over-the-counter ethanol derivative interest is at record levels, totaling 50,000 contracts between the two -- Analysts say spot ethanol margins have slipped 50 cents/bu in the last week due to aggressive hedging by ethanol plants and growing uncertainty over ethanol demand in the first half of 2010 -- The final plant acquired by Valero was formerly owned by Renew Energy, who threatened to close the plant if a sale was not made soon, and is located in Wisconsin; Valero paid $72 million for this particular plant -- Two of the three plants Valero acquired were formerly owned by VeraSun - the Linden, IN & Bloomingburg, OH facility - and are currently idle - restarting these two plants would consume nearly 75 million bushels of corn per year-- Valero purchased three more Midwest ethanol plants, taking their total capacity up to 1.1 billion gallons - the company paid $272 million for roughly 330 million gallons of ethanol capacity -- Dalian Corn futures were higher, May closed 3 yuan better at 1,798, while Sep futures added 4 to end at 1,873 yuan/mt -- Liffe Jan corn futures were off -0.50 euro at 132.25 euros/mt. -- Globex Corn Vol: 110,942; Pit Vol.: 9,757; Open Interest change: 1,985 -- Weather: 6-10 day Forecast: Normal to Below temps. Normal to Below Precip. -- Outside markets: Energy Complex +0.56 at $71.25; Gold & Silver: +9.2 at $1132.2 & +0.080 at $17.535; US $ -0.130 at $77.170
Cash Markets -- CIF Corn steady off 1. Dec. +?? to +21, Jan. +25 to +31, Feb. +36 to +39, Mar. +39 to +43, April +36 to +38, May +36 to +38, June +36 to +38, July +36 to +38
Corn also was unable to rally much today closing well off the highs. Look to buy this market on a test of 3.90. Risk a close under 3.79. It only takes a trade over 4.13 to make the weekly charts look good. A close over 4.25 would be enough to push this trade through the 4.50 highs for a test of 4.85. A January trade? Could be over equally as fast with a major set back when the funds are through buying. There is nothing here fundamentally to support that type of rally?
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