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NEAR-TERM MARKET FUNDAMENTALS: Yesterday’s eagerly anticipated August crop reports have come and gone with little or no lasting impact on the corn market according to one analyst. This appears to be the case since the report was considered negative on a substantial increase in the US and world supply for 2009/10, yet corn prices finished the day higher yesterday and the rally continued in the overnight session. The move to increase demand estimates for ethanol, exports and feed usage were seen as positive. Overnight strength came in conjunction with a very supportive combination in key outside markets with a lower dollar and substantially higher crude oil and equities. The fact that farmers have shown little interest in selling either old or new crop supplies on recent weakness in corn futures is also lending support to the market according to some traders. A spreading drought in NE China may also be adding modest support. Their Office of State Flood Control and Drought Relief said that 4.37 million hectares in this region were experiencing drought as of Tuesday of this week. This is three times the area affected as of July 31st. This comes during a week in which the government think tank, CNGOIC, increased their estimate of the country’s corn crop by 3.5 million tonnes to 166.5 million. US temperatures continue at normal to above normal levels in major growing areas with more dryness into this weekend than was being forecast yesterday. The 6-10 day forecast now calls for below normal temperatures across most of the Midwest with above normal precipitation across the southern Midwest, SE and much of the Delta. On yesterday’s USDA supply/demand report, the USDA raised its 2009/10 corn yield to 159.5 bushels per acre from 153.4 in July. Traders were looking for about 157.5. Planted acreage was left unchanged at 87 million acres with a slight reduction in harvested acreage. Total production came in at 12.761 billion bushels which would make this the second largest US corn crop on record. Ending stocks for 2009/2010 were pegged at 1.621 billion versus last month’s estimate of 1.550 billion bushels. The USDA raised projected ethanol usage 100 million bushels to 4.2 billion which fits with a gradually improving political outlook for ethanol in recent months. Total usage was up 350 million bushels from July’s report. World ending stocks for corn were pegged at 141.49 million tonnes versus 139.17 in July due to increased US production.
WEATHER: US temperatures continue at normal to above normal levels in many growing areas with more dryness now expected late this week and into Sunday than had previously been forecast. The 6-10 day forecast now calls for below normal temperatures across most of the Midwest and the central and northern plains in the US with above normal precipitation across the southern Midwest, SE and much of the Delta.
TODAY’S GUIDANCE: The USDA added to the supply side on yesterday’s reports but, when all was said and done, this was not much of a surprise and corn recovered from an early sell off to finish higher on the day. The advance continued overnight, and this appears to be short covering led by higher than expected demand forecasts and the outlook for colder weather by late next week. Weather forecasts seem to indicate that the worst of the hot temperature fears are not going to be realized, but dryness may be getting to be a minor problem in some areas.
