December corn was trading near unchanged to slightly lower near 7:45 am CST and Dalian corn was up 0.39% overnight. European shares fell for the third straight day overnight which pushed the Euro lower and the US Dollar higher. Outside markets have reversed course this morning and the US Dollar has turned lower and stocks are set to open up in positive territory. Gold, silver, and copper had a softer tone overnight but are now trading off session lows and gold is actually higher on the day. Crude oil has also erased overnight losses and is trading higher this morning. December corn traded in a 3 cent range overnight but the slightly positive spin to the crude oil and equity markets this morning could help support corn, as well as other commodities in early trade.
December corn traded in a narrow range overnight as market participants continue to prepare and position ahead of tomorrow' USDA report. Volume was recorded at 124,013 contracts and open interest rose by 3,261 contracts. The weekly Corn Harvest report showed 69% of the harvest as complete compared to 54% last week and 29% last year. This was slightly below trade estimates but no impact was felt in the market. The 10 year average for this time of year is 29% and this is still a record fast pace.
Basis has begun to firm noticeably in the last week since harvest is now just less than 3 quarters of the way complete. Most of the strength is coming from the interior markets near processing and ethanol facilities while cash export markets hold steady due to sluggish demand. A corn elevator near Chicago, IL increased their posted bid by 10 cents per bushel to option price the December contract and bids in Blair, NE rose by 15 cents per bushel to 30 over the December contract. Decatur, IL corn bids held steady at 15 cents over the December contract and bids on the river rose modestly as barge freight values fell.
The trade is expecting a US average corn yield near 123 bushels per acre vs. the September estimate of 122.80. Production is expected to fall near 10.600 billion bushels vs. 10.727 in September. Some in the trade continue to believe final production is less than 10 billion bushels when assuming harvested acreage as low as 83 million acres vs. current estimates of 87.4. Furthermore, the range of the estimated production level of the US corn crop by various market participants is over 1 billion bushels which reflects the variability in yields across the US Corn Belt and uncertainty in regards to the ultimate size. The market is also assuming beginning stocks of 988 million bushels which was revised lower from 1.181 billion bushels on the September 1st Quarterly stocks report. The stocks report suggested that US corn domestic feed usage may need to be adjusted higher by 100 million bushels or more.
The lack of export demand remains the ultimate drag on corn prices at the moment with inspections for the week ending October 4th reported at just 17.34 million bushels, a 4 week low, and just less than 8 million bushels below what is needed to hit the USDA estimate. World importers are covering their needs from South America or they are looking to create supply relationships with nontraditional suppliers. Mexico has approval to import Brazilian corn already and expects to have approval of Argentina corn by mid-2013. The French farm office cut their 2012/13 corn production estimate to 2 million tonnes vs. 2.36 last month.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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