Pre-Opening Corn Market Report for 6/17/2011

July corn was up 11 1/4 cents late in the overnight session, with the December contract up 8 cents. Outside market forces look much more positive today with a sharp setback in the US dollar and higher equity markets. With the market lacking bullish weather news and growing more and more fearful that Greek situation will bleed over to European and then international banks, funds have turned aggressive sellers of corn this week, especially old crop. The break is attracting increased interest from end users and corn importers, but this was not enough to offset the liquidation selling. Just after the close yesterday, the U.S. Senate voted 73 to 27 to end a couple of the government incentives for ethanol, including the 45-cent per gallon subsidy the government gives to refiners and the 54 cent tariff on imported ethanol, both of which are expected to expire at the end of the year. The bill is attached to another bill that is not expected to pass, so many traders saw the vote as merely symbolic. Weekly ethanol production last week was already pulling back due to higher corn values, and if the bill were to become law, it may not have a big impact on production short-term. Bit it could lower incentives to expansd or replace any plants that close. It would also lower the incentive by refiners to blend more ethanol, and weekly production levels would be much more impacted by short-term profit margins. There is still a mandate to blend 36 billion gallons of biofuels per year through 2022. Even though the yesterday's bill is unlikely to pass into law, the writing is on the wall, and traders are likely to begin moving ethanol production levels down for the new crop season. A good weather forecast for Midwest corn, weakness in outside market forces and continued talk of declining demand due to high prices helped pressure the market yesterday. However, December corn traded higher on the day into the mid-session with talk of the oversold condition. In addition, selling eased as outside market forces turned more positive and the US stock market showed some strength. Weekly export sales, released before the open yesterday, came in at 295,800 metric tonnes for the current marketing year and 598,900 for the next marketing year for a total of 894,700. Old crop sales of 347,000 metric tonnes are needed each week to reach the USDA forecast. Open interest for corn on Wednesday was down 18,640 contracts. The EU voted to extend the suspension of import duties for feedwheat and barley until December 31st. As a result, there is likely to be more feedwheat and less corn usage ahead. Asian users are also shifting to more feedwheat. Three different South Korean feed groups seek a total of 350,000 tonnes of corn and 220,000 tonnes of feedwheat on the world market. Israel bought 27,000 tonnes of corn and 22,000 tonnes of corn products. South Korea bought 55,000 tonnes of corn yesterday.

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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