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255532

Corn Market Watching Argentina Closely

The absence of the funds and money inflows allowed the market to trade fundamentals for a second straight day. Friday’s news was that a group of delegates from Mexico is actually headed to Argentina to hammer out a deal to switch some of their corn needs from the U.S.

Here are my comments regarding this situation:

  • The massive transportation cost advantage will always ensure the U.S. is the clear supplier. The question is the mix.
  • Total U.S. corn exports account for 15% of our usage. Of that amount, Mexico is our top buyer. In the most recent completed year available, they picked up 27% of all our exports. Over the past 10 years, 95.9% of their corn purchases came from the U.S. (85.9% - 99.7% range). For the completed 2015/16 crop year, they bought 13.603 million tonnes of the 14.011 total import from the U.S. (97.1%). If they do diversify, and we perhaps drop to an 80% share, then our export loss risk is about 2.4 million tonnes annually (94 million bushels).

Corn Market Action

Corn gave back 6¼¢ cents this week, closing at 368¼. We are still watching the 20-day (368) and 200-day (367) moving averages for support levels. Beyond that, 355½ will be a major support level to monitor. Given that we came within 10¢ of our upside target in the July contract, we will cautiously call a top to this market and look to establish short positions against unpriced, old-crop bushels. Our July downside target sits at 320 near expiration. Contact your Allendale broker to discuss strategies.

We will be watching weather in Argentina this weekend as there are heavy rains forecast. Early indications are that there will be some localized flooding. It is not expected to be widespread, but any reports of flooding might be perceived as bullish no matter how much actual damage occurs.

Japan came in and bought 194k tonnes of corn today, 60k old-crop and 134 new. That makes their new-crop total 363k tonnes for the week. Remember, there is no trade on Sunday night or Monday during the day due to Presidents’ Day. We will reopen on Monday at 7 p.m.

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