December corn was down 5 1/2 cents late in the overnight session. Outside market forces look somewhat positive today, with a weaker US dollar and strength in equity markets. There have still been no deliveries for September corn. The market saw heavy speculative long liquidation selling yesterday, and it pushed to a new low for the move overnight. Corn's premium to wheat coupled with another sharp break in wheat prices seemed to be the primary bearish force yesterday. Ideas that there will be a significant shift to more wheat and less corn feeding has been seen as something that will pull global demand away from corn. While the US market is setting back from its recent highs, China's corn prices hit another new record high this week ahead of their harvest. Officials there are insunuating that China will have a record production in the upcoming harvest, but thay are also suggesting that demand may outpace supply, which would indicate the need for imports. China's pork prices hit a record high for the 5th week in a row. As this is a key driver for inflation, it has implications for China's import activity for corn and/or pork. There have been reports of a significant investment being made by China in hog/pork productuion. If they were to see pork production expand by 10% in the next year using modern production facilities, it could increase their corn usage by 27.7 million tonnes or about 1.1 billion bushels. Argentina, the world's second largest corn exporter, will authorize the export of between 7 and 8 million tonnes of 2011/12 corn on top of the 12.6 million previously authorized. In Monday's world supply/demand report, the USDA pegged Argentina's production for 2011/12 at 27.5 million tonnes, up from the August report's forecast of 26 million and up from 22 million for 2010/11. The Agriculture Secretary in Argentina has forecasted a crop near 30 million tonnes. Increased harvest pressures helped to push cash basis levels lower yesterday, and the lack of new buying support helped turn futures down as well. The market saw some choppy trade early, but then is it developed a significant long liquidation trend by speculators. A lack of new commercial buying under the market and speculative selling helped drive the market to its lowest level since August 19th. Overall crop conditions improved for the weekly update, and Iowa's "good to excellent" readings were up 2%. This may have added to the negative tone. Ideas that early yields are not as bad as feared plus talk that conditions are not worsening helped to pressure the market. The move under Monday's lows was also seen as a negative technical development, especially in the wake of a key USDA report on Monday. Weakness in wheat added to the negative tone, and talk of cold weather for later this week plus the positive action for outside markets (higher crude oil, higher livestock prices and a lower US dollar) failed to provide much support.
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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