December corn was down 7 1/4 cents late in the overnight session, but the market had traded as much as 8 3/4 cents higher before the outside markets turned negative again. Weakness in energy and metal markets plus a further break in the stock market were seen as negative forces. With a strong correlation with the energy markets, reports of higher than expected yields from the field and massive fund trader long liquidation selling, the market remains in a steep downtrend. It is oversold, but the recent COT reports showed a large net long position held by funds, and speculators interest and harvest-time prices are at a record high. China's prices are also high going into their harvest, but even the extreme tightness outlook for this season does not seem to be enough to offset the long liquidation trend. Hedge funds are shifting out of agricultural markets, and this has pressured markets across the board. Fears of global deflation and the prospect of very slow or no growth due to economic actions in Europe and the US remain as a perceived threat, and this has sparked the selling trend. Funds were active sellers for much of the session yesterday and continued to sell overnight to push the market to the lowest level since July 12th, with December corn falling as much as $1.35 1/4 off of the August 29th peak. While there are still supply concerns, traders believe the corn market was pricing in a steady global growth theme for commodity markets, but after the Fed actions this week and European and China growth numbers yesterday, traders are seeing more of a global deflation theme to commodity markets. Supply fears have moved to the sidelines with a focus of attention on demand concerns and on shifting flow of capital, as traders see commodity markets as a risky investment. Weekly export sales, released before the open yesterday, came in at 598,100 metric tonnes, which was in line with trade expectations. Cumulative corn sales stand at 35.9% of the USDA forecast for 2011/12 (current) marketing year versus a 5 year average of 26.8%. Sales of 535,000 metric tonnes are needed each week to reach the USDA forecast. News of strong long-term demand from China and news from a weather firm of another adjustment lower in US corn yield this season failed to provide much support. The International Grain Council cut their forecast for global corn production by 4 million tonnes to 845 million tonnes. South Korea bought 55,000 tonnes of US corn overnight. China feedgrain officials believe the country may have a shortfall of 15 million tonnes per year by 2015, as the country sees increased needs ahead due to expanding meat and poultry production.
Join the Discussion