March corn was down 6 1/4 cents late in the overnight session. Outside forces look negative with growing concerns that China will implement more tightening measures to slow their economy. Rumors that China bought 500,000 tonnes of feedwheat on the world market sparked aggressive selling in corn, and the turn lower on the session attracted significant long liquidation selling from fund traders into the close yesterday. As of this morning, traders can confirm that China bought 150,000 tonnes of Australian feed wheat, and there is talk that China will buy up to 1 million tonnes of the feedgrain from Australia to help shore up tight feedgrain supply. With lower shipping costs, the feed wheat appears to be a better deal than US corn at the moment. The technical action is considered negative for the market, as the sweeping reversal from a contract high could attract increased technical selling pressures over the near-term. There were also rumors yesterday that the EPA was meeting with the USDA to discuss reducing the ethanol mandate, but while there were meetings, they were apparently scheduled to discuss expanding E15 to cars built after 2001. The market closed near the low end of a 29 cent range with an outside-day down from a new contract and new 2 1/2 year highs for the nearby futures. A general perception that China might turn to feedwheat as a substitute for corn helped to hold prices down after the initial corrective break. A turn lower in energy markets and talk of the overbought technical condition of the corn market helped support a turn from higher to lower on the session. Long liquidation selling increased as the market moved through unchanged on the day. Cash basis levels were said to be lower with an increased flow of producer selling since the rally after the USDA report last week. Heavy rains in Australia this year has traders expecting that nearly 50% of their wheat crop may grade out as feedwheat and compete with corn on the world market. Keep in mind, the drought in Russia and surrounding areas pulled feed wheat and feedgrains off of the world market. Argentina weather looks somewhat negative with more rain in the forecast next week and cooler weather after a 4-5 day stint of hot and dry weather just ahead. Yesterday's rains were said to be beneficial.
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