Pre-Opening Corn Market Report for 2/22/2012

May corn was trading down 2 1/2 cents late in the overnight session. Outside market forces look slightly negative for today with higher trade for the US dollar and weakness in metal and energy markets. Open interest is up 103,456 contracts over the past month but the market has mostly traded in a choppy and sideways pattern since January 24th. Ideas that it will take a significant weather issue this year to keep ending stocks from doubling for the 2012/13 season helped to spark a significant break yesterday led by what was called fund trader long liquidation selling. Old crop supply is tight but with weakening ethanol margins, traders see the firm cash basis levels and wide old crop/new crop spread activity plus relatively high prices as factors which might help conserve corn into the new crop season. The USDA Outlook Forum supply/demand outlook for the 2012/13 season will be released on Friday with traders thinking that the ending stocks estimates might come out on Thursday morning. If the USDA raises their planted acreage estimate which was 94 million acres in the baseline projections worked up in November, to 94.5 million and also leave trendline yield at 164, production could hit a record high of 14.202 billion bushels. Even if one assumes an increase in usage of 500 million bushels from this season, ending stocks would jump to 1.813 billion bushels. May corn saw a bounce of near 5 cents late in the session yesterday but still closed sharply lower. Despite a clearly bullish tone to gold, crude oil and the weak action for the US dollar, funds were active sellers in corn and wheat yesterday as the outlook for a record corn crop with normal weather and concerns that the US ending stocks outlook will at least double for the 2012/13 season compared with this season helped to pressure. Traders have been talking about the USDA outlook conference for the past two weeks so this was not "new news" so the aggressive selling pace from the funds was tough to explain. The market gave back nearly all of the gains from Thursday and Friday last week and futures challenged last weeks lows. Reports of decent rainfall over Argentine growing areas over the weekend put the corn market on the defensive, and more than offset what was seen as a positive tilt to outside market forces. Private exporters reported a sale of 110,744 tonnes of US corn to unknown destination for the 2011/12 time frame. Weekly export inspections came in at 34.7 million bushels which was near the high end of trade expectations. Exports need to average 30.9 million bushels per week to reach the USDA projection for the year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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