Key Points: ** Russian occupation of Crimea (Ukraine) putting risk premium in grain markets. ** Money flows into commodity driving prices broadly higher. ** Record 2013 crops still expected to hold extreme rallies (ie: north of $5 in any month) in check. ** Chart formations constructive, but achieving price count objectives near $4.80. ** Spec funds now long corn, "transferred" short to commercial to hedge increased farm sales. ** Livestock feeding profitable. Ethanol margins good in the spot, profitable through summer. ** March WASDE on Monday the 10th. South American production in focus. Overnight trade was choppy, though another big export sales week offered the market a modest spark to finish in positive territory by the AM break. New sales of 1.518 mmt (60 mil bu) in the old & 0.16 mmt in the new soundly thumped expectations and were nearly double the prior week. Mexico was the big buyer (437k mt) with Japan a close second (342k old + 164k mt new). Other buyers of note include unknown (207,100 MT), Colombia (179,400 MT), South Korea (134,300 MT), and Taiwan (75,900 MT). Total export commitments (sales + shipped) now stand at 92% of the USDA's current export sales goal. This will have analysts on point for another potential upward revision to corn exports (50 mil bu? 100?) in the next WASDE report, due out Monday, March 10. The report will also likely feature adjustments to South American production (probably to the downside). With fundamentals out of the driver's seat, corn trade takes on a greater deal of unpredictability, though simple technicals (ie: support/resistance) have proven a good guide of late for short-term trading decisions. Corn has achieved second price count objectives at $4.80 CK, which warrants some caution to the bull. If the market can handle the $4.80-$4.90 area, the next objective in CK is $5.10 - the second count in CZ is $4.93. CK should find support on any break back to $4.65-$4.70 for now. Corn took a breather Wednesday after two days of heightened volatility, easing back 2 cents. The Ukraine spark that helped ignite the markets Monday is in a holding pattern, with little news of significance to report. Though sellers assure buyers business is "normal" at Ukraine ports, there is still a great reluctance to commit to buying from this origin, and "what if" questions remain regarding future production. US corn for export is a bit pricey, given CIF bids near 100 cents for spot, but we are really the only reliable supplier of note for the moment. Domestic basis continues to weaken on the back of active farmer selling early week - it's difficult to find an end-user who isn't at least 60 days covered! Funds also took a bit of a break Wed - in fact, specs took some profits, selling about 9,000 contracts on the day. It's still much too early to tell if the "feeding frenzy" that has supported markets over the last month is over.
China's parliament is reportedly approving the MIR162 GMO variety, but as seems to be the case, the GMO was just a convenient excuse to stop "cheaper" imported grain supplies from disrupting domestic farmer support measures. Today, they confirmed they would boost farmer subsidies 10% in an attempt to boost self-sufficiency. The EIA yesterday pegged weekly ethanol production 1.5% lower wk/wk, as rail logistics issues continue to limit production potential in that industry despite absolutely fantastic
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Key Points: ** Outside week higher on weekly chart plus subsequent strength should imply min 45 day bottom. ** Spec funds mostly flat corn, "transferred" short to commercial to hedge increased farm sales. ** US corn competitive to most export destinations. Political unrest in competitors Arg & Ukraine. ** Record 2013 crops still expected to hold extreme rallies (ie: north of $5 in any month) in check. ** Livestock feeding profitable. Ethanol margins good in the spot, improved profitability in deferred. ** Arg/Brazil corn crop estimates: Informa @ 89 mmt, USDA @ 94 mmt, last yr @ 108 mmt. Overnight markets traded with a slightly weaker bias, finishing 2 cents lower by the AM break, likely on a combination of continued farmer selling and profit-taking from the early week rally. The story is the early release of Outlook forum tidbits; the USDA will initially peg corn acreage at 92.0 million acres, which would be lower than the 93.5 million released in the Baseline stats last week. The USDA will release a full provisional S&D for the 14/15 crop year next week, but did disclose today they expected prices to average $3.90 in the crop year - implying a decent-sized build in carryout, but perhaps not the optimistic projection offered in the baseline stats (remember the 165+ yield?). The current Feb insurance average price for corn is $4.58. Looking abroad, there are some indications Argentine farmers are loosening their grip on old crop beans - and perhaps corn, too? Ukraine appears to be heading in the opposite direction with political unrest taking on a more unsavory approach. The situation will likely slow sales further out of this origin, which should continue to push exporters in the US's direction? On the weather front, Argentina looks favorable ten days out. Brazil's Northeast and far South (incl. Paraguay) stays dry, but other Brazil growing regions are expected to get a good drink. Bad for harvest, good for late planted crops? The corn rally could very well have more life to it, but we are beginning to approach retracement targets that could slow things down. $4.55 to $4.60 is the next major problem area, though formation objectives still imply a possible move to $4.75 CH. In the options pit, consider selling April options to defray the cost of May options. May option contracts will carry through March Quarterly Stocks. Corn slammed through a wall of farmer selling yesterday, mustering a 4 cent higher close on the back of fund buying to the tune of 10k-12k contracts. Spread volumes remain active; March contracts begin their delivery shuffle in just six short trading days; March Corn is currently trading 6-12 cents below delivery equivalent. March/May spread has relaxed back to 6 1/2 cents, 2 1/2 cents below the month's high? USDA reported egg sets were up 1% yesterday afternoon, and the EIA will step in with weekly ethanol production later this morning. The trade is generally looking for a modest bump in production, which should place the current output rate near USDA grind projections for 13/14. Tomorrow, the USDA will offer up Cattle on Feed and the CFTC delivers updated Commitment of Traders stats.
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Last weekend, Indiana Grain CEO and Trade the Farm owner Tom Grisafi appeared once again on U.S. Farm Report to discuss the trader's perspective in today's commodities market.
"Our moves in corn are limited and so volatility has been hit," Grisafi explained, noting that volatility is the "fear factor."
"The conversation you would have had with a grower three or six months ago - hey, is there a chance we could go to $5, we might go to $6 - there's not many of those conversations now, Grisafi continued. Volatility is saying we're at a lower price level for a while."
To see what else Grisafi had to say about corn, soybeans, and markets in general, visit <a href="http://www.agweb.com/usfr/">The U.S. Farm Report</a> to view the segment in full.