Pre-Opening Corn Market Report for 11/5/2012

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November 6, 2012 1:39 AM EST

December corn was trading 1 1/4 cents higher around 7:00 am cst. Dalian corn traded modestly higher overnight and closed up 0.09%. The US Dollar traded stronger overnight as the Euro fell as concerns over Greece's debt were on investors' minds. Crude oil and copper are lower as well.

The sluggish pace of export sales continues to be a drag on corn futures in the short term but a worse than expected start to the US wheat planting season is helping support grain prices to start the week. The bounce in ethanol production and corn usage in last week's ethanol production report favors the bulls. Production was up 3% from the previous week and hit a 1 1/2 month high. Corn used in last week's production was estimated at 86.6 million bushels as compared with an average weekly total near 86.55 million bushels. Demand fundamentals remain mixed and offer a neutral bias to market action but investors and traders will be dealing with the Presidential election on Tuesday followed by the a USDA report on Friday. Money flow by managed money and hedge funds could be key to price direction this week along with renewed fears of a Greek default on debt. Volume on Friday was pegged at a whopping 305,618 contracts and open interest declined by 1,471 contracts. The sharply lower trade on Friday, huge volume, and modest cuts in open interest suggest a neutral to bearish bias.

The Commitments of Traders reports as of October 30th showed Non-Commercial traders were net long 289,833 contracts, a decrease of 46,264 contracts for the week and the aggressive long liquidation selling trend is seen as a short-term bearish force. Non-Commercial and Non-Reportable combined traders held a net long of 198,659 contract, down 44,332. In addition, trend-following funds (Non-Commercials net of index Funds) held a net long of 176,031 contracts and their position was slashed by 46,901 contracts from the week prior.

Cash basis is mixed around the US with a weaker bias in some processing markets but slightly supportive on the river and Gulf of Mexico after futures tumbled Friday. Davenport, IA river bids rose by a penny to 22 under the December contract and a river facility in Morris, IL increased bids by 7 cents per bushel to 22 under. Barge bids ended the weak stronger with November barges bid at 65 cents over delivered to the Gulf of Mexico. Bids in Blair, NE are unchanged at 30 over the December contract but cash markets slumped in Central Illinois with Decatur, IL slashing bids by 10 cents per bushel to 5 cents over the December contract. Bids in Central Illinois this time last year were near 20 cents over the December contract and the 5-year average is near option price.

The USDA attache in China reported China corn production for 2012/13 at 198 million tonnes vs. current USDA estimates of 200 million tonnes. The attache noted that lower domestic corn prices could mean an increase in corn usage in feed vs. wheat. Surging US prices have forced many Asian countries to increase their use of wheat in rations and some have switched to South American corn suppliers.

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*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.

Copyright CME Group All rights reserved.

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