The corn market saw early pressure to start the day on Friday, but firmed into early mid session. However, selling pushed prices successively lower over the remainder of the day and the March contract finished near the lows. The corn market continued to sag overnight under the weight of a higher dollar, lower crude oil, lower stock markets and the prospect of increased farmer selling in February according to traders. Cash traders report that many farmers tend to increase selling during the second month of the year as they look forward to increased cash flow needs for planting and for general operations during the coming year. Export demand for corn has greatly improved over the past 2-3 weeks, but supplies are still ample to say the least, and competition from cheap feed wheat will be an ongoing problem. Some cash market traders are concerned that farmers may become less willing to hold supplies in anticipation of $4.00 in the nearby contract. Weather in Argentina is thought to be somewhat less of a price factor in corn than it is in soybeans. Conditions were mainly dry there over the weekend with more moderate temperatures than have been seen in recent months. Scattered showers and thunderstorms are expected starting tomorrow. The Commitments of Traders Report for the week ending January 27th showed funds on both sides of the market, but leaning to the sell side. Index funds were net buyers of 2,811 contracts while trend-followers were large net sellers of 10,241 contracts to increase their net short position to more than 27,000 contracts. The month of December saw a very modest reversal of the 2008 trend toward a bigger net short position by trend-following funds, but this “reversal” has stalled in recent weeks. Small traders were net sellers of over 2,400 contracts to increase their net short position to nearly 80,000.
WEATHER: Rainfall was mostly light and scattered in Argentina over the past three days. Temperatures remained moderate over the weekend after starting to moderate last week. This is expected to continue over the course of this week. The forecast for today is mostly dry with increased scattered showers and some thunderstorms from tomorrow through Thursday. Brazil has returned to a pattern of drier weather in the south where corn is currently developing, and this is also expected to continue into mid week.
TODAY’S GUIDANCE: For corn to remain competitive on the world export market, either the dollar will need to go down, or the price of corn itself will need to remain under some pressure. When we consider that there are additional acres available to corn and soybeans this spring and that the average farm operation shows a substantial paper profit from planting corn on the basis of the December 09 contract, higher prices look less and less likely.