December corn was trading 4 3/4 cents higher near 7:30 am cst and Dalian corn traded 0.86% higher overnight. Chinese stocks were mostly higher overnight and once again the Chinese markets were lifted by strength in Banking and financial shares. The Euro hit a one-month high against the US Dollar and European markets saw modest gains ahead of Thursday and Friday's European Summit. US Stocks traded slightly lower following last night debate and the US Dollar fell, which sent most commodities, particularly Gold, higher overnight. Grain markets saw marginal gains but volume remained thin.
The corn market held a two-sided trade yesterday with early gains in December corn slowly eroding throughout the session but ultimately settling nearly unchanged. Markets appear tired as the dire supply situation is well known up to this point and demand will likely be the catalyst for any substantial gains going forward. Yesterday's volume was recorded at 138,701 contracts and open interest increased by 6,389 contracts which offers a mixed bias considering the traded range and settlement on the day.
Calendar spreads continue to hold up rather well against the choppy trade this week with the December vs. March spread holding near even money on the week. This comes despite the terribly weak export demand for US corn as buyers shift to Black Sea and South American supplies. Japan, who is normally a consistent buyer of US corn, bought 250,000 tonnes of Ukrainian corn for November and December shipment this week. The buyer provided no price per tonne for the purchase but stated the deal was struck at $1.10 over the December corn contract. The significance of this purchase is the rarity for this type of volume to trade at one time between the two countries. The volume was just under 25% of the total amount of corn Japan bought from Ukraine in the 2011/12 crop year. This, on top of a highly discounted South American corn market, continues to suggest current prices levels are at least taking exports out of the demand equation thus far.
A French analyst increased corm imports for the EU to 10.9 million tonnes vs. 6.3 in 2011/12. The analyst stated that they expect the corn to be sourced from mostly South America, the Black Sea region, and some from Canada. The significant increase in corn imports is partly due to the unfavorable weather conditions that damaged corn and wheat yields for the region which has in effect cut its wheat feeding usage. This is being balanced out with increased corn feed usage. The tight grain supply for the Black Sea this year along with the probability that South America will not be able to supply the rest of the world with corn on their own suggests there could be resurgence in US corn exports later this year.
Basis remains steady to firm in the interior of the US as processors attempt to drum up corn supply. Decatur, IL bids held firm at 15 cents over the December contract while bids in Burns Harbor, IN were quoted at option price the December contract. The firm basis, along with a rise in corn futures prices has kept ethanol processing margins in the red for areas in the western US. Public data shows Iowa ethanol margins last week were quoted at negative 52 cents per bushel. DDG prices fell slightly as soybean meal price levels subside and natural gas prices rose which added a significant increase to processing input costs. The EIA ethanol report will be released today and many feel ethanol production will rebound from the 800,000 barrels per day reported last week. Furthermore, the Census Bureau recently confirmed that August ethanol exports were reported at 50 million gallons which was down 10% from the same period last year. At the same time, August imports of ethanol increased to 98 million gallons in August, which in effect made the US a net importer of ethanol for the first time since October of 2009.
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