December corn was trading 2 1/2 cents higher near 7 am cst and Dalian corn was up 0.09% overnight. Outside markets had a defensive tone early this morning after European leaders failed to reach an agreement on how to manage Greece's debt situation. European shares and the Euro fell on the news which sparked a recovery in the US Dollar. The stronger dollar pressured grains overnight but since then the markets have turned around and Crude Oil bounced on news that Israel and Gaza have yet to reach a cease fire. Outside forces shifted to a more positive tone late.
The lower trade overnight was due in part to the stronger trade in the US Dollar but the market has turned around as soybeans surge to a new high for the week. Volume was impressive yesterday considering the holiday week with just over 231,800 contracts trading hands which took December corn to a new 12 day high. Open interest declined by 1,152 contracts on the sharply higher move. Comments made by the US Federal Reserve Chairman yesterday afternoon were considered slightly negative towards the US economy and this sent stocks lower but equities were able to recover into the closing bell which could add support to the market as we finish out the holiday week. Most expect volume to back off today as markets are closed tomorrow for the Thanksgiving holiday which could result in a choppy, two-sided trade.
Iowa ethanol margins saw a modest bump last week but remain deep in negative territory. Public data shows that margins for the week ending November 16th were at -42 cents per bushel vs. -53 cents the week prior. This is the 16th straight week with negative margins. The modest recovery was primarily due to lower cash corn prices vs. last week. The EIA ethanol report will be released today and traders will look to see if there is another draw on ethanol inventories. Stocks last week were pegged at 17.851 million barrels vs. 18.136 the week prior. The draw on inventories was linked to disruptions due to hurricane Sandy but a 3rd straight reduction could mean a shift to a more positive demand picture for the US ethanol industry. Domestic ethanol prices in Brazil have increased over 10% over the last 4 weeks which could mean Brazil traders are attempting to pull ethanol away from the export market. Brazil imports to the US have surged in the last 2 month so a slowdown could be a positive for the US ethanol industry since total ethanol production is down about 10% year/year.
Exports business remains quiet in the US. FOB offers basis the Gulf of Mexico were unchanged at 85 over the March contract for January through March shipment. Brazilian FOB corn offers for January were indicated at 30 cents over the March for January shipment. On a generic FOB basis, US offers out of the Gulf of Mexico are roughly a $21 per tonne premium to Brazil and a $24 per tonne premium to Argentina. While still a significant premium, the spread has narrowed significantly over the last couple of months.
Chinese officials confirmed on Wednesday that it would stockpile corn grown domestically at an average price of 2,120 Yuan per tonne, or roughly $340.15 per tonne. This would equate to an $8.64 futures price. The stockpiling program will end on April 30, 2013 and state warehouses will be required to accept as much corn as farmers can sell. This could be considered a positive for the corn market going forward if China picks up its import pace. China corn imports for the month of October reached 445,252 tonnes. This pushed the 10-month total for the year to 4.55 million tonnes, up 385% from last year's pace.
Argentina has heavy rainfall in the forecast for the middle of this week followed by another period of dry weather. Central and Southern Brazil will see rain into this weekend. Both of which should improve soil conditions and help move along the planting pace. The rain in Argentina is expected to delay planting once again and some analysts are cutting production to near 22.50 million tonnes vs. current USDA estimate of 28.