December corn was trading 3 1/2 cents higher near 7:30 am CST and Dalian corn was down 0.39% overnight. European shares traded lower for the second day in a row after the IMF cut its 2012 global growth forecast to 3.3% from 3.5%. The Euro is trading lower in early trade while the US Dollar is higher. Most commodities traded higher overnight despite the IMF revision after China announced it would inject around 42 billion of cash into money markets to help boost speculation and support its slowing economy. Corn also is seeing support from a stronger wheat market after Russian officials narrowed their wheat exportable surplus estimate overnight.
December corn tested yesterday's lows but bounced overnight after Asian markets recovered on news that it would start a new round of economic stimulus. Yesterday's traded volume was recorded at 132,773 contracts and open interest declined by 3,163 contracts. Volume was light across all of the commodity markets due to Columbus Day and traders took the opportunity to position ahead of this Thursday's Supply and Demand Report.
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.
Basis bids for corn were steady yesterday as futures slipped lower and farmer selling was slow as producers await higher prices later this quarter. The Harvest Progress report was delayed yesterday due to Columbus Day but traders expect the US corn harvest to be close to 70% complete when released later this afternoon. Basis in Decatur, IL was steady at 15 cents over the December contract while bids in Council Bluffs, IA increased by 2 cents to 12 cents over the December contract. The firm basis for areas of the US Midwest along with active bull spreading in calendar spreads yesterday suggests the physical supply of corn is tightening in the interior of the US.
Export demand remains sluggish for US corn as South American supply trades at a steep discount. A South Korean feed maker has issued a tender for up to 65,000 tonnes of corn and 55,000 tonnes of feed wheat overnight. Importers around the world continue to be concerned with the tightening course grain supply due to drought conditions in the northern hemisphere. A private analyst in Ukraine cut Ukraine's grain harvest estimate for 2012 to 42.4 million tonnes vs. previous estimates of 43.4. Included in that forecast was an estimated corn production of 21 million tonnes which was revised lower from 25-27 million tonnes.
China announced that it would issue low-tariff quotas for wheat, rice, corn, and cotton for 2013 overnight. Volumes were unchanged from this year and the announcement is part of its commitment to the World Trade Organization. Corn import quotas will be 7.2 million tonnes and the USDA expects China to import 2 million tonnes of corn in 2012/13.
*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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