** US likely to see record corn harvest despite issues (Sept @ 174.4 bpa). US Corn 15% harvested. ** World corn carryout seen near a record high, but not quite as burdensome when compared to use. ** Brazil meeting reduced second crop production through imports. Spring corn planting underway. ** Ethanol margins 25+ c/gal positive. Hogs flat/red. Dairy back in the black, feedlots losing $100. ** US Corn should see continued strong shipment pace. Black Sea, Arg, & US competing for O-N-D. ** Funds leaning about 175,000 contracts net short corn. May short-cover ahead of reports.
Overnight, the grain markets caught a rare bid, as corn finished 3 cents higher by the AM break. A weak export sales report threatened to rain on that parade, but traders may overlook this as “old news” given more recent positive news on that front. Regardless, net new sales of 575,000 metric tons fell short of estimates for 750k-1 mil. Most of the trade was to Mexico and Colombia. Sales + Ship stands at 18.55 mmt vs 10.53 mmt this time last year. Now, on to the good news – South Korea was in overnight for corn – two separate batches of two cargos minimum for Jan-Feb ship.
Yesterday, US PNW corn competed into that origin, and we would expect the US to have a decent shot at this business too. Remember as well yesterday’s 1 mmt sale to Mexico. Other than this positive kicker, the markets will be eyeing harvest and the Quarterly Stocks data tomorrow. Midwest weather has generally been conducive to harvest this week, and the west should continue to dry down through the weekend. 6-10 & 8-14 day maps are wet and warm? China struggling to sell reserve corn even more than usual as buyers there look to receive their own domestic harvest. Quarterly Stocks report tomorrow expected to find 1.754 billion bushels at the end of the 15/16 crop year, which compares to 1.731 the prior year and 4.722 on June 30. Likely difficult to get a truly bull number given 2+ bil 16/17 carryout expectations, but the speculator is leaning short already and may look to hedge that up some.
Recent trade has effectively carved out a corn range between $3.25 and $3.45 CZ, of which we are now approaching the bottom end. Dec Straddles ($3.30 strike) should still work as a trade vehicle, particularly if the resulting price levels work within your position. Consider buying Nov options if a defined risk approach is needed ahead of the Sept Quarterly or Oct WASDE reports.
Futures finished two cents lower in another very quiet session Wed. Dec volume didn’t even crack 100,000, but still accounted for at least 75% of all intraday activity. The Managed Money crowd effectively sold back out what they bought back in Tuesday. They are short a rough estimate of 175,000 contracts, assuming the most recent CFTC estimate is correct, heading into Friday’s report. In the cash, CIF values were a little firmer again today, while the interior was soft. “Weekly EIA Day” left a lump of coal in the stockings of ethanol traders, reporting a surprise uptick in production and an even more surprisingly large build on stocks. Production of 989,000 bbl/day (+0.8% wk/wk) was higher than the slightly lower read we were expecting. If carried forward, today’s rate would consume 5.35 billion bushels of corn over the course of a marketing year. Despite the bear data, the ethanol futures crush ended the day little changed, near the highest levels of the year. Spot cash margins are close to 90 cents/bu (30 c/gal). Both cattle and hogs continue to struggle, mustering only anemic rallies off the prior day’s new lows. Producer margins there are breakeven at best to negative (excluding dairy & feathers). After the close yesterday, USDA pegged egg sets up 3% & broilers placed up 1% yr/yr.
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