December corn was trading 6 cents lower near 7:30 am CST and Dalian corn was down 0.73% overnight. Global markets were under pressure overnight. European and Asian stocks were lower as investors fear slow global growth and poor US corporate earnings will stifle the US economic recovery. The World Bank cut its estimate for East Asian growth, including China, which has triggered profit taking in commodities like soybeans, gold, and crude oil. The US Dollar is trading sharply higher which is adding additional pressure to most commodity markets and US Stocks are set to open lower on the day.
Corn turned lower overnight as traders liquidate positions and head to the sidelines ahead of this week's USDA report and as outside markets took on a negative tilt. Traded volume last Friday was recorded at 151,096 contracts and open interest declined by 4,416 contracts. The Commitments of Traders reports as of October 2nd showed Non-Commercial traders were net long 322,569 contracts, a decrease of 1,449 contracts for the week. Non-Commercial and Non-Reportable combined traders held a net long of 220,930 contracts, up 4,053 for the week. Trend-following funds (Non-Commercial Net of index funds) cut their net long by 2,643 contracts to 211,662.
Weekend rainfall was extensive in growing regions of Argentina which should benefit early planted corn. Argentina's government believes that 4.97 million hectares of corn will be planted this year vs. 5 million in 2011/12. Brazil showers were limited to Mato Grosso, southern Rio Grande Do Sul, and parts of the eastern coast. The weather outlook also included better rainfall for central Brazil by this weekend and again in the 11-15 day forecast. This should benefit dry areas in Brazil and early planted corn. The US forecast looks favorable for harvest progress with showers limited to the southern plains later this week and the trade expects the Harvest Progress report this afternoon to show corn harvest near 70% complete vs. 29% as the 10-year average.
The US corn basis firmed on Friday, mainly at barge loading facilities on the river as supply pipelines grew thin and on slightly better export interest and lack of farmer selling. Davenport, IA river bids increased by 5 cents per bushel to 20 cents under the December contract and bids in Morris, IL rose by 2 cents to 20 cents under the December contract. Bids in Decatur, IL were unchanged at 15 cents over the December contract which is similar to basis for the same time last year but well above the 3-year average near 10 cents under the December contract.
Traded volume may dwindle over the next couple of days as we move closer to Thursday's USDA supply and demand report. The trade is expecting a US average corn yield just under 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. A closely followed analyst released their updated production estimates on Friday and reported a yield near 127.2 bushels per acre and production at 11.194 billion bushels. Yield reports continue to be highly variably which is leaving a lot of uncertainty over the final production estimate. 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.
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