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NEAR-TERM MARKET FUNDAMENTALS: Traders indicate that the market has seen major position squaring ahead of this morning’s Supply and Demand and World Production reports and that these reports are likely to be the major price influence in the early going along with the dollar and stock markets. Most traders are looking for a small increase in ending stocks for corn for 2008/09 which could take that number to just over 1.8 billion bushels versus last month’s 1.79 billion. Cash markets showed some weakness yesterday on slightly increased farmer selling ahead of the reports. A senior grain official in China said today that the government will not buy any further grain from last year’s harvest. This would include soybeans, corn and rice, and the official added that about 70% of the purchase plan for the 2008 crop has already been completed. The US agricultural attache in Japan said that an outbreak of H7N6 avian influenza in Japan is not raising human health concerns there as of yet. The H7 strain has not been detected in domestic flocks in Japan since 1925. News this week that the EPA may shift the percentage of ethanol in the gasoline mix helped traders become more confident in the corn demand outlook and the general outlook for an increase of 500 million bushels used for ethanol production. Deliveries against the March contracts today were 637 contracts with the month’s total at 14,684.

WEATHER: Showers and thunderstorms are still in the forecast for northern and north central growing areas in Brazil with locally heavier amounts that could cause further harvest delays. Cooler temperatures and showers in the south should continue to benefit crops there. Argentina is expected to be dry and warmer this week.

TODAY’S GUIDANCE: A good deal of much-needed short covering is now out of the way, which raises the question of whether there are reasons for the corn market to continue rallying after the USDA reports are out of the way. A higher stock market may be one very good reason. With the push to well above 700 in the S&P yesterday, some of the immediate gloom may have lifted and any extension of that rally should cause traders to a start thinking about a modest recovery of some of the demand that has been lost since last September, especially in terms of feed usage. This could take the May contract to 390 to 392 and the December 09 contract to near 420 over the very short term. Some support exists near 366 and this can hold today barring a bearish surprise on the reports. Additional support is at 357 to 359. Resistance is at 387 and near 398.

This content originated from – The Hightower Report.