Pre-Opening Corn Market Report for 2/3/2006 March corn traded 3/4 of a cent higher in overnight action with a 2 1/2 cent range.
The move to the highest level since mid-September overnight leaves the corn market vulnerable to more fund and speculative buying and short covering over the near term. The market seems to have been concentrating on the old crop bearish fundamentals with plenty of buyers caught short bought on this rally and speculators caught net short. A surge in demand news over the past few weeks and a greater awareness over the possible expansion of ethanol production in the US has provided a base of support. Lower planted acreage is anticipated in the US, and traders are concerned with other factors which might pull yields below trendline, like La Nina dryness, an Illinois drought problem and talk of less fertilizer usage for the coming season. Funds were noted buyers of nearly 9,000 contracts yesterday. South Korea bought 110,000 tonnes of US corn overnight. Near term support for March corn comes in at 217 and 216 with 222 and 224 1/2 as resistance.
Rain in Argentina and talk of the overbought condition of the market helped trigger the early weakness yesterday, but strength in the wheat market and solid demand news helped support the move higher on the day. Funds were noted buyers of near 2500 contracts into the mid-session. Weekly US export sales for corn came in at 1.44 million metric tonnes, which was above trade expectations. Cumulative sales have reached 58.2% of the USDA forecast as compared to 52.8% on average over the last five years. Sales of 630,300 metric tonnes per week are needed to reach the USDA estimate. Cheaper freight charges and pent-up demand has helped spark the hefty sales recently.
Gulf basis was steady yesterday. South Korea bought 110,000 tonnes of US corn overnight. Ethanol production in 2005 was thought to be near 4.0 billion gallons, up from 2.0 billion in 2002, and capacity by the end of this year should be near 5.0 billion gallons. It is hard not to see the sugar market as an example of what can happen when the demand base continues to improve for months on end. Ethanol from cane in Brazil now supplies 41% of their gasoline needs, and 7 out of 10 cars can run on 0 or 100% ethanol. Key resistance for May corn include 234 1/2 and 242 1/2, with support at 228 1/2.
