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NEAR-TERM MARKET FUNDAMENTALS: A higher dollar and ongoing planting progress outside of the wettest areas of Illinois and Indiana helped to pressure the corn market overnight according to traders. Concern over a potential recovery rally in the dollar is considered less of a problem in corn than it is in wheat according to traders, but they indicate that overseas buyers may temper their buying somewhat if the dollar continues to move higher. Traders are also watching China’s stepped up sales of soy meal into SE Asia, but most traders consider this to be a minor factor in the corn market which has been supported in recent months by strong export sales to East Asia. Cash markets remain in a fairly steady mode with some traders indicating that farmers are willing to sell in moderation at current levels, but that they are not interested in increasing the rate of selling until the market rallies another 20-30 cents. Rain is expected in Indiana and parts of Illinois today, but amounts may be less than previously forecast. The 6-10 day forecast calls for above normal rainfall in most of the Midwest except for Ohio. The USDA’s Export Sales Report will be delayed until tomorrow due to the Memorial Day holiday earlier this week.
CASH NEWS AND TENDERS: An Israeli consortium is tendering for 24,000 to 32,000 tonnes of corn and 14,000 to 20,500 tonnes of corn products. Iran is tendering for 100,000 tonnes of South American corn.
WEATHER: Rain is expected to hit eastern and southern Illinois and much of Indiana today, but possibly not Ohio as previously forecast and overall amounts may be less than previous forecasts. This should be followed by dry conditions across virtually the entire Midwest tomorrow and Saturday and possibly into Sunday. Illinois and the eastern and southern Midwest may then remain dry into Monday. Conditions become more mixed after that and the 6-10 calls for above normal rains in Illinois, Indiana, Missouri and much of the western corn and soybean belts.
TODAY’S GUIDANCE: Market direction is all about the flow of supplies into the cash market at this point. Moderate selling in recent days has kept pipelines fairly well stocked in the interior although we saw a pop in the nearby basis at the Gulf yesterday, and tightness could redevelop fairly quickly. Right now, we may be in a rough balance in the cash market with some farmers looking to boost cash flow and others either too busy to sell or waiting for higher prices. A rally in the dollar could tip the balance to the sellers this morning if that market continues higher. This could bring a setback to 420 or even as low as 416, but this price level would probably slow down the pace of farmer selling and provide a good place for traders to get long. First support is near 421 1/2 in the July contract and again near 415 to 416. First resistance may be as low as 428 to 429, but this would be temporary. Next resistance is at 434 and 438 1/2.
TODAY’S MARKET IDEAS: Illinois and Indiana still had 7.2 million acres to be planted as of Sunday and we are 13 or so days past optimal planting. If we assume that 25% of these acres do not get planted to corn, it would mean that the market could face a loss of close to 306 million bushels. The USDA’s current forecast for ending stocks for the 2009/10 season is 1.145 billion bushels, so if we keep all other factors the same, this loss would leave ending stocks near 839 million bushels. Under these circumstances the stocks/usage ratio would fall to just 6.7%, the second tightest in history. Buying support for December corn comes in at 441 1/2 and 438 1/4 with 485 and 527 as upside targets.
