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Corn low still undecided

10/01/2012 @ 11:37am

Closing Corn Commentary

Broker Perspective: Today saw a quarterly Grain Stocks report that was quite bullish for corn. Trade thought we had 1.113 billion bushels of corn on hand and today they reported that pile was only 988 million. Instant market reaction was to bounce corn 20 to 25 cents which appeared to be fitting given that number. Bulls that have been waiting for any news to buy from took care of the rest. Even though there were no other changes to fundamentals, the bulls went as far as claiming the fall low is in. That type of thought caused buyers to almost stumble over each other to quickly run the corn market up limit and then spill over into buying wheat and beans as well. Bulls really do feel as though they have put a bottom in this market which could certainly lead into additional buying Sunday night. Today’s limit higher move has now made the quarterly stocks report result in 8 limit moves out of the last 10 reports. It might be a little early to call a fall bottom today as there are a few other bullish objectives that need to be reached to make that claim. First, the downtrend line crosses at 765 1/2 today which has not been broken yet. Secondly, we will have to see if this higher trade causes importers to come in buying corn over the weekend. Importers have three options right now: 1) Buy US corn thinking that the fall low is in 2) Buy South American corn for current needs thinking US corn will continue to drop or 3) Do what they have been doing which is nothing at all. If bulls can see the technical trend line taken out and also get fundamentals on their side with new exports, they certainly can make the claim that the lows are in. Most bears are likely still ahead if they did not liquidate early this morning. It is possible that the fall low is in but it is still just a little too early for us to call that today.

Ending Stock Confusion: USDA emphatically told us on the September 12 supply/demand report that a record harvest of corn by the end of August would mean a record amount of corn hitting the market in August and offsetting old crop Jun – Aug demand. Bulls argue 1) old crop feed use was simply that much better or that 2) the supply of new crop harvest in August was much smaller than the 1.2 billion bushels they were expecting. Bears can argue a few things. 1) USDA’s June – August old crop feed use numbers never make sense anyway, 2) maybe producers simply used more old and less new but that the USDA will lower new crop feed use on the October report to compensate, or 3) maybe the far South had lower production but harvest reports out of the Midwest with good results more than offset that. Either way we say higher trade by 20 to 30 cents early next week. We are not ready to change our 660 downside target for the end of the year yet. There are too many questions and too few answers yet.

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