December corn was trading 5 1/2 cents lower near 7:30 am CST and Chinese markets were closed for the "Golden Week" Holiday. December corn was under pressure in early trade but markets took on a risk off tone once Europe opened. Sharply lower trade for soybeans and wheat added to the downside momentum for corn. Poor service PMI data out of France, Germany, and Italy has European markets and the Euro lower this morning. The Eurozone PMI was pegged at 46.1 in September vs. 46.3 in August. The US Dollar is higher this morning which is adding to the negative tilt for the grain markets.
December corn failed to move above yesterday's high at 760 and pressure from sharp declines in soybeans and wheat have finally spilled over to the corn market. Yesterday's traded volume was recorded at 187,284 contracts and open interest increased by 5,132. The recent surge in volume and increases in open interest could suggest traders are using the consolidation, below last Friday's highs to enter into new long positions ahead of next Thursday's USDA report.
A closely followed trade house released their revised US average corn yield and production estimates after the close yesterday. The average corn yield was reported at 123.9 bushels per acre vs. 121.4 previously. Production rose to 10.827 billion bushels vs. 10.607 previously. The USDA in September showed a 122.8 yield and production at 10.727 billion bushels. Given the revised production level, harvest acreage was left unchanged at 87.4 million acres and if all demand levels remain constant from the September USDA report, the 2012/13 carryout would rise to 830 million bushels vs. 734 currently. The better than expected yield forecast may have triggered some long liquidation from last Friday's gains. However, the beginning stocks will be revised lower by 193 million bushels which would offset a rise of up to 2.2 bushels per acre.
Corn basis was marginally higher for some areas of the Midwest with a processor near Chicago, IL raising bids by 5 cents per bushel to 17 over the December contract. Decatur, IL was unchanged at 25 cents over the December contract while Council Bluffs, IA bumped bids by 7 cents to 8 cents over the December contract. Farmers continue to deliver on existing contracts and new sales are slow given current cash price levels. The BSNF railway has issued public rates for corn moving directly to Decatur, IL from origins in North and South Dakota. This seems to be a non-traditional move and the listed rate is a clear indication of the low supply in particular markets in the Corn Belt. This could keep good support to cash markets in Iowa and Nebraska as early harvest corn may be more difficult to source given the additional competition from processors in the east.
Limited showers in north and central Brazil are keeping soil moisture levels at a deficit but will allow for germination of planted corn. More rainfall will be needed this month and a rain event is scheduled to show up in the 11-15 day period. Extensive rainfall will move into Argentina late this week and again in the 11-15 day period. A quarter of the Corn Belt could see planting delays due to the rainfall but flooding is not expected.
*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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