March corn was trading 3 cents lower late in the overnight session. Outside market forces look negative today with a surge up in the US dollar and weakness in equity, energy and metal markets overnight. While the USDA report showed a sharp drop in South America production and a further decline in US ending stocks, there were no surprises for the report and the technical action turned sour yesterday. The bearish tilt to outside market forces may tempt fund traders to dump long positions due to the negative response to supportive news. Some parts of the report were not so supportive as Ukraine exports were revised higher by 2 million tonnes to 14 million. Ukraine's Farm Minister has asked grain companies to focus on exports of corn and barley but not wheat. Funds were noted as active sellers on the market yesterday. The Buenos Aires Grains Exchange cut their corn production forecast to 21.3 million tonnes from 22 previous and this compares with the USDA estimate yesterday of 22 million. March corn closed moderately lower on the session yesterday as the USDA report news was considered neutral to slightly negative. However, buyers turned more active in what traders said was a spurt in fund trader buying to drive the market to the highest level since January 12th and to 1/2 cent higher than the close ahead of the key January 12th stocks and final production reports early yesterday. The lower close after posting a new high for the move was seen as a negative technical development. The USDA pegged ending stocks for the 2011/12 season at 801 million bushels as compared with 846 million last month and this was up about 10 million compared with trade expectations. A stocks usage ratio of 6.3% is the second lowest on record and may help provide underlying support. However, focus of attention could be shifting to short-term demand indicators (like weak ethanol margins) and traders will soon be looking at the 2012/13 outlook which suggests a more plentiful supply if yield is anywhere near normal. US Exports were revised higher by 50 million bushels which was right on trade expectations. World ending stocks were pegged at 125.35 million tonnes from 128.14 million tonnes last month and from trade expectations for 124.9 million. This is a world stocks/usage ratio of just 14.4% which is the lowest since the 1973/74 season at 11.7%. Brazil production was 61 million tonnes from trade expectations near 59.2 million and Argentina production was pegged at 22 million tonnes from trade expectations at 21.6 million tonnes and down from 26 million in January. Net weekly export sales for corn came in at 694,100 metric tonnes for the current marketing year and 63,700 for the next marketing year for a total of 757,800 which was lower than expected. As of February 2nd, cumulative corn sales stand at 65.6% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 61.8%. Sales of 491,000 metric tonnes are needed each week to reach the USDA forecast. Malaysia is tendering for 120,000 tonnes of corn from Argentina. Vietnam seeks 50,000 tonnes of corn from Argentina and 85,000 tonnes of optional origin feedwheat. An ethanol company executive believes that exports this year will drop to 500 million gallons as compared with 1 billion gallons in exports for the first 11 months of 2011.
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