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NEAR-TERM MARKET FUNDAMENTALS: Traders said that yesterday’s late sell off in grain futures came on fund selling and disappointment over weakness in crude oil and equities. Prices also finished near the session lows in corn overnight. Basis levels were mixed in corn yesterday with traders citing strong demand and moderate farmer selling. The demand included a 110,000 tonne sale of corn to a South Korean feed mixer which was announced this morning. Half of that sale was reportedly from the US and the other half was South American. Weather in the Midwest looks dry in some areas right through early Sunday although showers are expected starting Thursday night and into Friday in the SW, southern and central Midwest. Analysts say that this should still result in some delays in field work, but perhaps not as severe as was anticipated earlier in the week. Meanwhile, harvest is proceeding at a rapid clip in most major growing areas in South America. The USDA will issue its latest Supply/Demand Report tomorrow morning. Traders are looking for another small reduction in 2008/09 ending stocks. This would follow a similar reduction on the March report.
WEATHER: Mostly dry conditions are expected in the Midwest through Saturday or longer with the exception of showers developing in the SW Midwest on Thursday night and spreading across the southern and central Midwest on Friday. Virtually all harvest areas in Argentina and Brazil are forecast to be mostly dry over the next few days.
TODAY’S GUIDANCE: Despite good demand on the export side, corn prices are languishing. This may be due to the fact that trend-following funds reversed so sharply from net short to net long over the past month or so. This may have overextended these big spec longs and put the market into a much-needed profit taking mode. While traders expect another drop in corn ending stocks tomorrow, on-farm stocks are still large and this should continue to weigh over the market. Traders may have also over-anticipated an economic upswing in recent weeks along with the increased demand for meat that this implies. The sell-off in crude oil and equities to start the current week has been a dose of reality on that score. First support is near 397 1/2 in July corn. The next support is near 391 1/2, but we would not rule out a break to 385 3/4. First resistance is at 406 with the next resistance at 415.
TODAY’S MARKET IDEAS: While open interest increased again yesterday, there are signs that the gains of the past month or so are temporarily stalling out.
