Trading in grains for the remainder of the week will be guided by the perception of what the November 8 USDA monthly crop report will say.  The October report was canceled so the government is adding up all the statistics from September and October.  Pre-report thinking is that yields, production, and ending stocks will come in higher for corn and beans and that the report will be measurably bearish. 

THE WILD CARD

The wildcard is if the government is not caught up from being closed during much of October and ends up surprising the market by not being as bearish as anticipated.  Should the government actually be caught up and the report comes out bearish as the trade is anticipating, it should end up being the last bearish supply side report of the year.  We then become a demand driven market.  So we should expect a low next Friday that will hold going into the end of the year. 

EXPORT SALES

Corn export sales released last Thursday showed that there were 4.5 million metric tons of corn sold for a 1.5 million metric ton average for the last three weeks.  Mexico, Japan and China were all big players in the market.  Corn sales are 10% over the five year average.  Pre-report trade estimates were only looking for 1.8 million metric tons, so the report day rally was sold as traders are focused on supply side fundamentals ahead of the November 8 USDA crop report. 

Corn demand is simmering under the surface.  This week South Korea made its first corn purchase from the U.S. in 16 months as U.S. prices fell below competitors Brazil and the Ukraine.  Black sea corn values are now 5¢ a bushel over U.S. values.  This is vastly different than this past summer when Brazil and the Black Sea Corn was priced 50 to 60 cents a bushel cheaper than U.S. corn. U.S.  corn is becoming price competitive in the world and the next leg down on prices may come off the November 8 crop report putting in a harvest low price and potentially trigger buying.

Corn has been trading in a very tight range ahead of the report, trading in a tight range between $4.24 and $4.30 a bushel basis December. If we see a report day break this Friday that sends Futures prices to new three year lows around $4.00, I would suggest the following trade. I would suggest buying the March Corn 450 call for 10 cents or in cash value $500.00. The cost of the call is the risk on the trade plus all commissions and fees. It is my belief that there will be big demand for producers to buy corn with both hands down at these levels and await for higher prices to unload. 

WEBINAR

My grain team at Walsh will be discussing these issues and the November 8 crop report on our weekly webinar series each Thursday at 3 pm central. Sign up here.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

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