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NEAR-TERM MARKET FUNDAMENTALS: A lower dollar provided only modest support to the corn market overnight. Traders say that longs are nervous after Friday’s substantial sell off from a new high for the move. Funds have been big buyers in corn on the rally, but they were sellers late in the week. Traders are also concerned over the lack of buying by importers on the late stages of the rally in corn with last week’s export sales total falling to just about 235,000 tonnes. This is far short of the weekly average of about 822,000 tonnes needed each week to reach the USDA’s export projection. However, the Commitments of Traders Report for the week ending October 20th showed net buying by funds. Trend-followers were net buyers of 23,281 contracts to increase their net long position to 109,161. They had been net short by over 67,000 contracts in February and they were net short by about 40,000 contracts just a few weeks ago. Index funds were net buyers of 3,558 contracts. Wet weather late last week and into Saturday matched expectations, and this has brought the corn harvest to a halt in many growing areas. Today’s forecast calls for heavy rains in the western Delta today with that rain pushing east and north into the mid south and Deep South by tomorrow. A band of mostly light rains is expected from East Texas up through southern Wisconsin with areas to the east and west of this band staying mostly dry today.
TODAY’S GUIDANCE: A big new high followed by a substantially lower close is generally considered a reversal and that’s what we saw in the corn market on Friday. However, the new high was just for the past 3 1/2 to 4 months, not a new contract high, and delays in the corn harvest are still a big problem. The biggest problem for bulls is a lack of export sales in corn on the late stages of the rally. However, there are two ways to look at these weak sales. One is that importers do not intend to buy on a rally and the market will need to move lower to attract buying purchases. The other view is that importers now have a gap in their buying needs that will need to be filled soon with accelerated buying regardless of price. We tend to agree with the second view, and would add that the current price of just over $4 in the nearby December contract is still relatively cheap given the recent declines in the dollar. First support remains at 393 1/2 to 395 1/2 in December corn, then at 383 to 384 1/2. First resistance is near 419 1/2, then 427 1/2 and then near 435.
TODAY’S MARKET IDEAS: Aggressively long traders can certainly lighten up on a rally today, but we would not liquidate all longs just yet. Shorter term traders can take their cues from a strong move in either direction in corn today.
