December corn is trading 1 cent higher near 7:30 am CST. The corn market traded steady to slightly lower overnight following yesterday's gains. Dalian corn traded higher overnight. The US Dollar is trading slightly lower and US Stocks are set to open lower on the day. The Euro traded higher overnight which pressured the US Dollar but European shares followed Asian market lower which is sending a negative tone through the outside markets this morning.
December corn saw a minor setback overnight, following yesterday's outside-up day. The wheat market may have been the catalyst for the explosive move higher but Hurricane Isaac and it's potential impact on corn production provided additional support. Heavy rains and wind from Hurricane Isaac are expected to affect Arkansas, Mississippi, Alabama, Tennessee, Missouri, Illinois, and Indiana this week. With 52% of this year's crop rated poor/very poor, the high wind and heavy rain may have a negative impact. Weak stalks for harvest-ready corn leaves the crop vulnerable to see ears shaken to the ground. The Hurricane is currently moving at 5 mph and blanketing the affected regions with torrential rainfall. This could cause flooding for some regions, and also significantly impact the quality of the corn.
The interior cash corn basis was mostly unchanged yesterday but farmer movement was light ahead of the Labor Day weekend. With Hurricane Isaac expected to reach the central Midwest by the weekend, the harvest pace could ratchet higher before detrimental weather delays progress or damages crops. This could increase the movement of corn and pressure nearby basis bids. River bids for corn weakened yesterday as barge freight costs move higher. The low water levels on the Mississippi River, along with the shutdown of the Port of New Orleans have briefly disrupted traffic. Decatur, IL corn is bid 55 cents over the September.
Corn used in last week's ethanol production is estimated at 87.3 million bushels vs. 87.67 last week. This crop year's cumulative corn used for ethanol production is 4.87 billion bushels so usage would need to hit 148.4 million bushels in the last week of the season to meet this crop year's USDA estimate of 5 billion bushels. The weekly EIA report also showed that conventional blending of ethanol increased to 5.44 million barrels per day vs. 5.42 million the week prior. Gasoline remains a hefty premium to ethanol in the September, October, and November contracts so despite the pressure from politicians and the livestock industry; the refineries will continue to blend ethanol with gasoline as long as the financial incentive is there to do so. A narrowing of the gasoline vs. ethanol spread in the longer term could have an impact on the rate in which ethanol is blended with gasoline, thus reducing the demand for ethanol and corn usage. At last week's pace, corn usage for the coming season would come in at 4.5 billion bushels which is the current USDA forecast for the 2012/13 season.
The positive demand influence by ethanol production is being offset by major importers switching to feed wheat or purchases of corn from cheaper origins like Argentina, Brazil, or Ukraine. Thailand feed wheat imports are set to rise to 1.5 million tonnes vs. 300,000 tonnes last year. Japan has also increased it's usage of wheat in feed rations as the price of US corn and DDG's trades near record highs.
*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.