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NEAR-TERM MARKET FUNDAMENTALS: Weakness in the stock market is again the most significant price factor in corn according to traders. In addition a rally in the dollar index overnight took the March contract there to the highest levels since November 21st, 2008 and left the dollar within striking distance of the late 2008 highs. One analyst noted that corn is still in a position to see further demand destruction in the US on the feed side if job losses continue to mount. The sharp drop in export sales last week after 5 straight weeks with totals over 1.0 million tonnes also threw up a cautionary flag according to some traders. Some cash market sources in the US indicate that ample on-farm stocks and declining corn prices have some farmers concerned that they will accelerate the downtrend by selling corn that they have held on to in hopes of higher prices. Government sources in Japan indicate that they imported small quantities of corn from the Black Sea Region in January for the first time since the late 1990s. The Commitments of Traders Report for the week ending February 24th showed that funds were modest buyers overall after a recent wave of net selling. Index funds were net buyers of 5,035 contracts. Despite this modest uptick in the long position held by index funds, their long position remains near the lowest level seen since the CFTC began tracking their position separately more than 3 years ago. Trend following funds were net buyers of just 390 contracts, but this leaves them just above the record net short position established on the previous report. Deliveries against the March corn contract were 2,322 contracts with the month to-date standing at 5,979 contracts.
CASH NEWS AND TENDERS: The USDA announced another sale of corn to South Korea yesterday for 116,000 tonnes. Traders report that Iran is tendering for 100,000 to 110,000 tonnes of corn.
WEATHER: The recent weather trend in Brazil is expected to continue with northern harvest areas for soybeans remaining dry and Rio Grande do Sul continuing to get needed moisture. In Argentina, rainfall last night and into today has been somewhat less general than expected, although it has brought some overall improvement to the soybean crop. Dry conditions are expected to resume by Thursday. This is no longer a significant factor in corn.
TODAY’S GUIDANCE: Trend-following funds are already net short in corn by a near record amount and index funds currently are near the smallest long position that they have held since separate record keeping began in 2006. This suggests at least the possibility of further selling by both groups, and there is certainly no indication that either group is ready to consistently return to the buy side despite a modest uptick on the latest COT Report. The “other shoe” is still farmer selling which has remained light despite larger-than-usual on-farm stocks of corn and the fast approach of the planting season. Farmers are expressing an unwillingness to sell in the fear that it will accelerate the downtrend, but there appears to be no way out of this ‘Catch-22.’ The sharp drop-off in export sales on last week’s report also suggests that export demand will not bail out the farmers’ position. Near term support is near 349 to 350 in the May contracts with the next support near 340. Resistance is at 370 to 373 and again at 378.
TODAY’S MARKET IDEAS: A push below 350 in the May contract today could result in a quick drop to 340. That may be the best trading opportunity for today.
