December corn was trading 7 cents higher near 7:30 am cst and Dalian corn traded down slightly overnight. Corn traded steady to lower for most of the overnight session but Chicago wheat surged higher near 3:30 am cst after newswires reported that the Ukraine Ag Ministry would ban wheat exports as of November 15th. The US Dollar traded modestly higher against the Euro as EU leaders meet in Brussels to discuss their debt situation. Mainland Chinese shares were a touch weaker but they did finish the week with a gain.
Positive technical signals along with the prospect of a tightening world supply outlook, which could force corn demand to the US border, is adding a positive tilt to corn this morning. December corn rose sharply on Thursday and follow through support is being seen this morning on the heels of reports that suggest Ukraine will ban wheat exports as of November 15th. The news is adding momentum to grain markets in early trade as traders become increasingly concerned with the global cereal and coarse grain supply outlook. Funds reportedly bought 12,000 corn contracts yesterday and volume was impressive with 190,500 contracts trading hands. Open interest increased by 3,807 contracts. The sharply higher trade, new weekly high and positive changes in volume and OI suggest bullish momentum in the complex.
The news out of Ukraine in regards to wheat exports could have a major impact on the corn trade and will now leave many to wonder if grain limitations will be made in their entirety. Ukraine's corn production was pegged at 21 million tonnes and many in the trade feel this is overstated. Furthermore, South America and Ukraine have been the main sellers of corn to major importers around the world in the short term while US prices have risen. South American basis has strengthened this week and logistics are becoming a nightmare in Argentina as vessel loading slows and in some cases comes to a complete halt. Some suggest this could shift importers to the US in the short term. A withdrawal of Ukraine from the export market would likely tighten the global supply outlook further which could send a wave of bullish psychology through the marketplace.
Corn basis was steady to firm yesterday as futures surged. Decatur, IL held steady at 15 cents over the December contract and Burns Harbor, IN bids were unchanged at option prices the December contract. Next Monday's Harvest Progress report should show harvest nearing completion which could add support to basis levels as cash movement slows down. The support in basis will likely stem from the livestock and ethanol markets rather than exports. This could be a short term positive for nearby corn calendar spreads such as the December 2012 vs. March 2013 spread.
South Koreas major feed mill group bought 63,000 tonnes of corn on a tender for 140,000 tonnes overnight. The trade was for US and South American origin. In addition, Japan's use of corn in animal feed fell in August for the 8th straight month and hit a 20 year low. The ration of corn in animal feed fell to 42.7% in August vs. 44.7% in the same time period last year. At the same time, the ratio rose to 4.3% in wheat's favor, which was the highest in nearly 2 decades.
*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.
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