December corn is trading 4 cents lower near 7:30 am CST. The lower trade is linked to profit taking and weaker outside markets. A better than expected corn yield for parts of Indiana was reported the crop tour yesterday evening which likely trigger a slight amount of profit taking after this week's rally. Outside market forces are offering pressure to the grain markets this morning as the US Dollar trades higher and the US Stock market set to open the day lower. Poor export data reported out of Japan overnight is adding to the negative tone this morning. Dalian corn traded lower overnight. December corn traded in a narrow range overnight following 5 straight sessions of higher highs. Volume was noticeably better yesterday with 248,692 contracts trading. Open interest rose by 21,273 contracts bringing total open interest to 1,257,862 and just under year ago levels. The rise in open interest, along with steady volume, may be supportive to prices in the short term.
The trade continues to monitor corn yields and conditions from a major crop tour moving throughout the Corn Belt this week. After scouring fields in South Dakota and Ohio Monday, the tour moved through Nebraska and Indiana yesterday. The tour pegged Indiana's corn yield at 113.3 bushels per acre, which was up from the last USDA estimate of 100, but down from the tours 3-year average of 155.8. Nebraska's corn yield was estimated at 131.8 bushels per acre vs. the tours 3-year average of 156.9. The better than expected yield in Indiana surprised some market participants since Indiana was one of the harder hit states by the drought. Scouts continue to cite small stalks, small ears, lack of kernel fill, and a many fields that have already have been zeroed out by insurance adjusters. Western Corn Belt crop scouts did offer a positive spin to some of the corn in Nebraska after irrigated corn weathered this year's drought noticeably better than dry land corn.
Early harvest reports continue to circulate around the markets and are offering a bullish tilt to prices. In some cases yields are actually being reported below test weights. Reports of low moisture, test weights below 50, and aflatoxin could have a major impact on domestic demand markets this year. Some studies have shown that low quality corn may impact ethanol yields by as much as 3-23% which could imply more bushels of corn will be needed in the coming year to effectively produce the same amount of ethanol. Quality could also impact the cattle and livestock industry since more grain will be needed to attain adequate cattle weights.
Corn basis was firmer across the Midwest yesterday as physical traders attempt to drum up grain movement. Spot basis for corn in Linden, Indiana rose 27 cents to 50 cents over the September Chicago corn contract. Decatur, IL and Council Bluffs, Iowa basis bids rose a nickel nearby. August corn barges, delivered to the Gulf of Mexico, were bid steady near 30 cents over the September corn futures contract on Tuesday; this was a 16 cent discount to first half September barges. Cash corn basis levels have bounced off early August lows as demand for new crop corn bushels from central Midwest ethanol facilities has forced Delta corn north on the Mississippi River. However, due to extremely low water levels, there are reports of vessels running aground in the lower Mississippi and barges are being forced to load lighter cargos when traveling south towards the Gulf of Mexico. This could be positive for cash corn markets in the short term; however no heavy rainfall is expected which could impact logistics in the long term.
*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.