December corn was up 10 cents overnight while the front month September contract pushed 14 cents higher to post a new record high of 8.12. Early losses in the night session were erased around 11:00 pm CST when December corn broke out above the 7.80 level and pushed higher the remainder of the night. November Dalian corn traded.25% higher overnight. Outside markets are helping grains this morning with stocks higher, crude oil pushed above $90, and the US Dollar is lower.
The corn market continues to defy gravity and posted a new record high of 8.12 overnight. The front month September contract continues to surge this morning as the ongoing US drought intensifies. A large banking institution raised their forecast for corn prices for 2012/13 to 7.85 per bushels vs. their previous forecast of 5.75 per bushel. Rainfall in the eastern Corn Belt, southeast, and delta in the last 48 hours has done little to calm the market as US corn yield estimates continue to fall with each passing day. Corn open interest increased by 8,765 contracts yesterday, bringing the total open interest to 1,163,633 contracts.
Yesterday, storm systems moved through central and eastern South Dakota, Nebraska, southern Wisconsin, northern Illinois, Indiana, and Ohio. Accumulation was light with .50 to 1 inch for most areas and local amounts slightly better. The Delta and Southeast continue to see good rainfall but nearly all of the central and western Midwest remains dry. A thin strip of showers are moving through central Illinois, central Missouri and northern Indiana this morning. Rainfall is expected to be scattered with limited accumulation. Offsetting the rainfall is temperatures that once again exploded higher this week nearing 100 degrees for most areas of the Midwest and western Corn Belt. Decatur, IL is expected to reach 99 degrees by next Monday and the 10 day forecast calls for highs in the mid to upper 90's. Overall, the weather outlook is largely unchanged from what the market has experienced since June as rainfall has disappointed and the extreme heat remains.
The demand outlook for corn continues to weaken as ethanol production slows and rumors swirl that Chinese feed producers are in talks with US suppliers to sell back 4-5 corn cargos. Chinese officials are also reportedly in talks with a major Ukrainian farm company that would allow Ukrainian corn to enter the Chinese marketplace. This deal will certainly be a drag on US corn exports long term; however no deal is expected to take place until the end of this year. An Israeli group bought 25,000 tonnes corn from what is likely a Black Sea origin and the US Grains Council claims corn exports from India could hit a record high of 3.5 million tonnes in the 2011/12 marketing year.
Some market strategists feel we are at a tipping point because of the popularity in the press because of these market developments. However, the fundamentals have not changed, and the bulls remain in control. The corn yield is dropping each day due to the weather conditions and the domestic supply of wheat continues to fall. Until drastic changes in demand take place, prices will continue to climb higher. The market is no longer at the point in which we hope bushels are being added. Instead, we are now at a point where we are hoping no more bushels are taken from us.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.