U.S. grain markets were closed overnight for the 4th of July holiday. The corn market will resume normal hours as of the 9:30 CST open. Dalian corn traded 0.25% higher. Outside markets were mixed overnight but have since turned positive following the announcement by the Bank of England to continue asset purchases. While the European Central Bank did cut rates as expected, the biggest surprise this morning was a reduction in Chinese 1 Year deposit rates, which in turn provided a lift to a number of physical commodity markets. Crude oil was higher as of 6:30 am and the U.S. Dollar was trading sharply higher. There were no reported deliveries made in Chicago corn as of July 3rd. Blistering temperatures and sparse rainfall accumulation is expected to support corn futures today, this after December corn managed to post its 3rd straight new high for the move on Tuesday. Market on close buying was prevalent Tuesday as traders sought coverage ahead of the brutally hot 4th of July holiday. Storm systems are currently moving through southwest Nebraska and central Iowa and are expected to track northeast, missing the parched farmland of Missouri, Illinois, and Indiana. The 6-10 day maps show better rainfall for the Delta and Southeast but accumulation is minimal. The rainfall for the Midwest during this period is scant, with the best showers reaching Wisconsin and Minnesota. Weather models disagree over temperatures as one shows a cooler pattern, while the other suggests above normal temperatures. The 11-15 day map shows a better chance for rain in the Delta and Midwest but confidence is extremely low at this point in time. Bottom line for corn, 25% of the corn crop was silking as of Sunday, July 1st and the extreme heat this week will likely accelerate the pollination pace near 40-50% by next Monday, causing irreversible damage to yield. The window for crop saving rain and cooler temperatures is closing quickly. The trade has already begun to revise corn yields lower for the 2nd or 3rd time in some cases. Current trade projections range from 145 bushels/acre to 150 bushels/acre. It is also likely that the percentage harvested will need to be revised lower on the next USDA crop production report. If we dropped harvested acreage to 88.5 from the current 89.1, used a yield of 149 bushels/acre, and revised demand lower by a modest 350 million bushels, this would imply a 2012/13 carryout of 628 million bushels and a stocks to usage ratio of 4.7%. This would be considered under minimum supply pipeline levels by some and this type of extreme tightness in supply would call for extensive demand destruction and price rationing. Corn demand remains extremely poor as international buyers will likely look to cover their needs from Argentina, Ukraine or Brazil. Weak corn demand will provide long-term resistance to a significantly higher price trend, but a questionable 2012/13 supply situation could warrant further risk premium in the short-term.
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