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NEAR-TERM MARKET FUNDAMENTALS: After finishing last week on a down note, corn pushed below Friday’s low in the May contract yesterday and then took out Monday’s low overnight. The latest round of selling came in conjunction with a lower dollar, but funds were on the sell side yesterday and this is raising concerns that trend-following funds might resume their long term push to the short side. This week’s export inspections were in line with trade expectations at 34.0 million bushels. Cumulative export inspections stand at 42.1% of the USDA’s export projection for 2009/10, still well below the 5-year average of 49.1%. Inspections need to average 44.8 million bushels each week to reach the USDA’s projection. The pace of export sales has crept a bit closer to its 5-year average in recent weeks than is the case with inspections, but recent sales to important East Asian customers such as South Korea have been for delivery in mid summer or later which suggests that they may be decently covered through late into the current marketing year. This adds to the possibility that sales and inspections will continue to lag the 5-year pace in coming weeks and that the USDA may again need to lower its export projection. In recent sales to Japan, higher freight rates pushed the sales to the US as the freight cost from South America approached $20/tonnes from a more normal freight of near $10/tonne. Brazil’s crop supply agency, Conab, raised its 2009/10 corn crop slightly to 51.38 million tonnes from 51.36 in February. Weather forecasts in the US call for rain in the Midwest and South through the end of the week. Heavier amounts are still called for across the mid-South and Deep South, especially on Thursday, but amounts for the Upper Midwest have been increased somewhat near the end of the week. This comes as snow melt has soil moisture levels at fairly high levels in many areas. After two straight very wet spring planting seasons, traders are thought to be nervous about the potential for localized flooding and planting delays in corn again this year.
TODAY’S GUIDANCE: Traders see ending stocks near unchanged for tomorrow morning but this forecast includes weaker demand numbers (especially export) and a lower production forecast by about 35 million bushels. If the “re-survey” shows production unchanged, the market is vulnerable to some bearish surprise for the report. Given the lagging pace of export sales and shipments, corn remains vulnerable to selling pressure whenever the dollar rallies. That is the case this morning and old crop contracts appear headed for a test of the 360 level, just above the early February lows. The December contract may find better support due to the wet spring weather and it could hold above its February lows. May corn support comes in at 365 and 359. December corn support is near 395 1/2.
TODAY’S MARKET IDEAS: Erosion is hard to stop in the corn market after it starts gaining momentum, and that appears to be where we are at right now. Hold off on buying, and look for continued erosion in call premiums in old crop contracts.
Corn Market Commentary – 2010.03.09
by Terry Roggensack on March 9, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
NEAR-TERM MARKET FUNDAMENTALS: After finishing last week on a down note, corn pushed below Friday’s low in the May contract yesterday and then took out Monday’s low overnight. The latest round of selling came in conjunction with a lower dollar, but funds were on the sell side yesterday and this is raising concerns that trend-following funds might resume their long term push to the short side. This week’s export inspections were in line with trade expectations at 34.0 million bushels. Cumulative export inspections stand at 42.1% of the USDA’s export projection for 2009/10, still well below the 5-year average of 49.1%. Inspections need to average 44.8 million bushels each week to reach the USDA’s projection. The pace of export sales has crept a bit closer to its 5-year average in recent weeks than is the case with inspections, but recent sales to important East Asian customers such as South Korea have been for delivery in mid summer or later which suggests that they may be decently covered through late into the current marketing year. This adds to the possibility that sales and inspections will continue to lag the 5-year pace in coming weeks and that the USDA may again need to lower its export projection. In recent sales to Japan, higher freight rates pushed the sales to the US as the freight cost from South America approached $20/tonnes from a more normal freight of near $10/tonne. Brazil’s crop supply agency, Conab, raised its 2009/10 corn crop slightly to 51.38 million tonnes from 51.36 in February. Weather forecasts in the US call for rain in the Midwest and South through the end of the week. Heavier amounts are still called for across the mid-South and Deep South, especially on Thursday, but amounts for the Upper Midwest have been increased somewhat near the end of the week. This comes as snow melt has soil moisture levels at fairly high levels in many areas. After two straight very wet spring planting seasons, traders are thought to be nervous about the potential for localized flooding and planting delays in corn again this year.
TODAY’S GUIDANCE: Traders see ending stocks near unchanged for tomorrow morning but this forecast includes weaker demand numbers (especially export) and a lower production forecast by about 35 million bushels. If the “re-survey” shows production unchanged, the market is vulnerable to some bearish surprise for the report. Given the lagging pace of export sales and shipments, corn remains vulnerable to selling pressure whenever the dollar rallies. That is the case this morning and old crop contracts appear headed for a test of the 360 level, just above the early February lows. The December contract may find better support due to the wet spring weather and it could hold above its February lows. May corn support comes in at 365 and 359. December corn support is near 395 1/2.
TODAY’S MARKET IDEAS: Erosion is hard to stop in the corn market after it starts gaining momentum, and that appears to be where we are at right now. Hold off on buying, and look for continued erosion in call premiums in old crop contracts.
Tags: Corn, Grains
About Terry Roggensack