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NEAR-TERM MARKET FUNDAMENTALS: Fund selling pushed the March corn contract lower for the third straight day into the close yesterday. Traders indicate that favorable harvest weather and stepped up farmer selling are the dominant factors in the corn market this week. Mostly dry weather is expected to last well into the weekend with the exception mainly being light snow flurries. Forecasts continue to call for some light and scattered precipitation in the extreme eastern and SE Corn Belt on Sunday with mostly light and scattered showers in the west on Monday. However, more substantial moisture is forecast for Tuesday and Wednesday of next week with the heaviest amounts creeping from west to east along the southern half of the Midwest and across the mid south. One analyst noted that farmers remain torn over whether to accelerate the pace of their harvesting along with the recent spate of drier weather or to let some fields remain unharvested. Harvesting corn that contains too much moisture raises a host of quality and cost issues including the expense of drying the crop and the loss of yield that this can entail. Storing corn with higher than usual moisture raises further risks and selling it outright means a price discount in the present environment. In addition, basis levels are much lower than usual in key areas such as Iowa. Hence, the potential decision by some farmers to leave crops in the field through as late as spring. The analyst noted that this may be causing the weekly harvest progress numbers for corn to be somewhat lower than they would otherwise be given the recent spate of mostly dry weather. This week’s export sales for corn were at the low end of trade expectations yesterday, down nearly 50% from last week’s big total. Net sales came in at just 659,000 tonnes. As of November 26th, cumulative corn sales stand at 38.6% of the USDA forecast for 2009/2010 versus a 5 year average of 45.3%. Sales need to average 822,000 tonnes each week to reach the USDA forecast. China says that it will stop making subsidy payments to corn and soybean processors if prices rise above a certain level.
TODAY’S GUIDANCE: Selling by funds yesterday looks like a trend for the week at this point. This stands in contrast to expectations by many traders for stepped up fund buying to start the month of December as well as expectations that index funds will start to buy corn as part of an annual rebalancing that may peak in January. Meanwhile, farmers are steady sellers, basis levels are weak and erosion in cattle points to weak domestic feed demand. Export sales are also spotty. That points to further erosion in corn until we see signs of increased fund buying or improved consumer demand for meat. First support ranges from 398 down to 395 in the March contract. Next support is just above 390. First resistance is near 406 1/2 and then at 413 1/2. The next resistance level 424 1/2 may not be challenged any time soon.
