March corn was trading 4 cents higher late in the overnight session. Outside market forces look slightly negative today with a firm US dollar and weakness in metal and energy markets. The surge in gulf corn basis and continued strong gains in interior cash basis levels has helped to support more active buying in the corn market in recent days. While the basis rally has attracted some increased producer selling in soybeans, producers seem to be holding tight to corn. Exporters are competing against the strong interior cash markets for supply as ethanol and livestock producer demand remains stout as well. March corn closed sharply higher on the session yesterday and has now rallied as much as 43 1/2 cents from last week's lows. Rumors that Russia would tax exports supported wheat and rumors that Argentina may ban exports supported the corn rally but neither rumor could be confirmed. Argentina quickly denied the rumor but cash traders do see the government getting involved to ensure that too much corn is not exported. About 7.5 million tonnes of Argentina corn already has export licenses and the USDA thought Argentina would export near 18.5 million tonnes. However, this was when the USDA believed the crop was 26 million tonnes and many traders have adjusted estimates to near the 20-22 level. Near panic buying in the cash corn market in the Midwest and at the gulf for export has helped to support futures as cash premiums this high have not been seen in many years. Central Illinois is bid at 27 cents over March as compared with 12 under March last year. Bearish weather news from Argentina and a negative tone for outside market forces helped to pressure the corn market early yesterday. However, speculative buying emerged to provide support with talk that the cash market is strong enough to keep buyers active on minor set-backs. Exporters who have booked recent deals to Mexico and others are finding it difficult to buy the corn in the cash market due to slow producer selling and surging basis levels. The rally has pushed the market to the highest level since January 12th, the day of the bearish USDA updates on production and stocks. Open interest was up 7,949 contracts on the strong rally Monday.
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