December corn was trading 4 cents lower near 7:00 am cst and Dalian corn traded modestly higher overnight. Weaker equity markets in Asia and Europe and expectations for a sharp break in the US stock market to start out this morning has left a bearish tilt to outside market forces this morning. The Fed begins a 2 day FOMC meeting today, but the trade isn't expecting any news from that front until Wednesday afternoon. Grains, energies, and metals are all starting the day with significant losses.
Outside markets took on more of a "risk off" tone overnight and weakness spilled over to corn moving to the lowest level since Thursday. Lack of follow through from the bull camp triggered profit taking overnight as the market wrestles with bullish fundamental short term factors mixed with bearish outside market influences. Volume was noticeably light yesterday with only 104,470 contracts traded and a very minor increase in open interest. The data suggested a neutral bias after corn settled nearly unchanged on the day.
The weekly Corn Harvest report showed that 87% of harvest is complete which was just below market estimates of 89% and compared to 79% last week. This time last year corn harvest was just 60% complete and the 10 year average is 52%. The prior highest percent ever completed for this time of year was 81% in 1991. Overall, progress in the eastern Corn Belt remains slightly behind the west due to minor disruptions caused by rainfall. The next 10 days show minor pop up showers in the east but no extensive delays are expected. Basis was mixed across the Corn Belt with a bit of weakness in Morris, IL after bids fell by 5 1/2 cents per bushel to 18 cents under the December contract. Burns Harbor, IN was paying 12 cents over while Decatur, IL held steady at 15 cents over the December contact. The river market was steady to slightly weaker as buyers stepped away on limited export business in the Gulf of Mexico. Processor bids in the northern Corn Belt felt weaker on the day.
While cash bids firmed last week in South America, activity has been steady so far this week as buyers step to the sidelines. Brazilian corn is now just under a $40 per tonne discount to the US vs. $50-55 only weeks ago. The European Union granted approval of GMO corn variety MIR 162 yesterday and it's rumored that Brazilian corn has already traded into Europe. Some in the trade suggest that Brazilian fobbing capacity may shift towards Europe, forcing Asian demand to the US. This scenario has not unraveled yet and will likely take time to develop. This does suggest that European grain supplies are historically tight which could be supportive to US corn values in the next 3-6 months. Export inspections remained unimpressive with just 9.6 million bushels reported vs. 17.2 million last week and nearly 26 million bushels are needed each week to reach this year's USDA forecast.
Iowa ethanol margins remain in negative territory as of October 19th. Public data suggests facilities are now losing 46 cents per bushel which is up from a 51 cent per bushel loss the week prior. Minor reductions in cash corn and natural gas input costs helped improve margins but this is the 12th straight week of negative margins.
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