December corn is trading 5 cents higher near 7 am CST. December corn traded a 10 cent range overnight as traders position ahead of the USDA report this morning. No deliveries have been made in July corn. Total open interest in the July contract is 2,124 contracts. Dalian November corn is trading down.46%. The corn market is expecting 2012/13 domestic ending stocks near 1.280 billion bushels which is nearly 600 million bushels lower than the June estimate of 1.881 billion bushels. Though not likely, a cut below 1 billion bushels would be considered extremely bullish to the market. The trade is also expecting 2012/13 global corn stocks near 145 million tonnes, or 10 million tonnes lower than the June estimate. World supply and demand revisions that may be important to watch will be decreases in feed demand and cuts in U.S. and Ukrainian production. The USDA report is only a best guess on U.S. yield and production and is NOT a surveyed report. As a result, traders see the USDA yield estimate coming down sharply from the record 166 posted last month but many feel they will not push yield lower than 155 bushels/acre. However, this is not certain. In 1988, the USDA effectively cut yield from 121.2 in the June report to 87.1 bushels per acre in the July report. A yield of 140 appears closer to reality and without rain for the next 10 days in Iowa, yield expectations could drop further. The market is trading a yield near 140-145 bushels/acre. Even if we knock off 1 billion bushels in demand, a 140 bu/acre yield leaves ending stocks at an impossibly low level of 397 million bushels. With 12% of the crop (11 million acres) in very poor condition, traders see increased abandoned acres. Traders expect downward revisions to all facets of the demand side of the balance sheet. Noticeably weak export demand and negative ethanol margins will provide the USDA will credible ammunition to cut demand expectations. It's the same story, but a different day for weather in the Corn Belt as one model 6-10 day forecast calls for wetter conditions while the other model has a much drier outlook. The trade has very low confidence in the wet forecast as it's been wrong since the beginning of June. Storm systems continue to sit over the delta and southeast this morning. This area saw good showers yesterday as well. These showers will be far more beneficial to soybeans then corn as much of the southeastern corn crop is fully pollinated. The central Midwest and western third of the Corn Belt look dry to finish out the week. While cooler temperatures have prevailed, the lack of rainfall will stress silking corn in these areas and yield loss is to be expected. Field reports look far worse than current expectations for yield in parts of the eastern Corn Belt and if pollination is negatively impacted by extreme dryness stress in Iowa this week, yield expectations could be well under 140 by this time next week.
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