December corn was trading 5 3/4 cents higher around 7:00 am cst while Dalian corn was down slightly. The US dollar is firm but outside market factors look mostly positive due to strength in gold, wheat and soybeans.
Continued talk that US corn will likely be competitive on the world market in a matter of weeks has helped support the solid gains in the past few sessions. While export demand has been very slow and ethanol usages is down significantly from last year, cash basis levels in the US remain historically high for this time of the year and if US corn becomes competitive on the world market, traders see continued firm cash trade ahead. A group of Israeli buyers bought 90,000 tonnes of corn from Ukraine overnight which might ease tightness concerns regarding talk that the US will be competitive soon.
The weekly crop updates showed that 91% of the crop is harvested compared to 87% last week and 74% last year. The 10 year average for this time of year is 65%. This is a record fast pace. Traders remain concerned that southern Brazil and Argentina corn may not get planted on time but some dry weather into next week might open a window for some progress. Traders will monitor the projected rain event for this region for later next week as progress may be slow. Less than ideal planting conditions for the region helped to support the higher close yesterday. Concern that heavy rainfall in areas of Argentina may remove nearly 20% of its projected corn crop forced bears to the sideline yesterday. The recent hail, rain, and flooding in Argentina could mean that some corn fields are completely lost which could result in drastic cuts to production. The USDA is projecting Argentina corn production at 28 million tonnes and a 20% reduction would reduce the crop down to 22.4 million tonnes vs. year ago levels of 21 million tonnes. The tight global balance sheet in corn is a supportive factor long term and a production problem in South America could intensify the situation. However, it still may be too early to give up on a significant portion of the crop; especially with a drier forecast into next week.
Additional support yesterday was linked to thoughts that the US may see an uptick in corn export demand from Asian buyers. New import licenses from Europe are high and traders see diminishing supply of old crop corn from South America and there is little South America corn offered after December. Weekly chick placements numbers were supportive for domestic feed outlook and traders see a slight increase in weekly ethanol production for the update today. Weekly export sales for tomorrow are expected to remain sluggish.
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