May corn was unchanged late in the overnight session. Outside markets looked somewhat positive with higher metal markets and a firm tone to equity markets. There were 79 deliveries against the March contract overnight. The market continues to recover from last week's 2-day collapse of 76 3/4 cents, and open interest appears to be stabilizing. Fund traders who were active sellers last week on the break were light buyers yesterday, and this provided the market with some underlying support. Signs of improving, not declining, corn demand last week helped to support the recovery bounce. Traders believe the market needs to move to a high enough level to slow demand and avoid a further tightening of old crop supply. In addition, the USDA Outlook Forum presentations last week showed that it will take a strong yield and a major jump in planted acreage this summer to avoid extreme tightness in the 2011/21 marketing year. For example, if we were assume that all of the Outlook Forum numbers but yield are correct and that yield remains the same as last year, ending stocks woold come in at just 99 million bushels versus the Outlook Forum estimate of 865 million. Even if we assume a simple 5-year average yield, ending stocks would come in at 221 million bushels. This suggests the the market needs a big jump in plantings and high yield to avoid extreme tightness. March and May corn closed at a new high for the move yesterday, and March corn came to within less than 1 cent of the highs. Ideas that deliveries were light, a lack of aggressive end-of-the-month selling and talk of tightening supply ahead after recent strong news for exports and ethanol usage lent support. There were 164 contracts delivered on first notice day for March corn and another 79 overnight. Weekly export inspections, released during the session yesterday, came in at 24.051 million bushels, which was well below trade expectations and below the 42.5 million bushel average needed each week to reach the USDA projection. A series of rain systems are expected to leave heavy rain amounts across the delta and Midwest for the next few weeks. Traders see this wet/cool outlook as a positive force. The market is likely to remain very sensitive to weather developments. Argentina dissolved its agricultural trade agency (ONCCA) last week, which was responsible for setting corn and wheat export limits. This may have left a vacuum, as it is unclear how permission to export will be granted. The short-term impact could be to slow movement out of Argentina.
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