Evening Corn: 6,000 July 3.70 Calls traded between 9-10 cents

Evening Corn: 6,000 July 3.70 Calls traded between 9-10 cents

A modest stab at short-covering overnight did not survive into the dawn, and the market settled into a lackadaisically lower trade during the day. Futures closed a penny lower, and volume/interest managed to downtick another notch. Managed Money traders were viewed net sellers of 5,000 corn today and are estimated to be net short over 310,000 combined futures and options - a record high. Cash trade was steady/better in the interior, but tended to be lower in deferred Gulf slots, perhaps in a belated effort to compete with cheaper South American sellers.

News flow in the grains remains extremely light, as the bull desperately searches for something to stem the fund selling in the market. Farmer gripes about "too wet" continue in all but the SW quadrant of the Corn Belt, but the market appears content to wait and see if a dryer outlook in late April and early May survives the next set of forecast runs. South American crop estimates continue to slowly inch higher, too, adding to negative sentiment.

The weekly EIA report had something for everyone, finding larger-than-expected ethanol production for the bear, but also a larger-than-expected draw on stocks for the bull. Production increased +1.5% this week, which was close to our forecast for steady to 1% better. The resulting 1.016 mil bbl/day rate would utilize 5.44 billion bushels of corn over a marketing year. Ethanol demand proved remarkably stout, prompting another 2.2% ethanol inventory draw this week. In three reports, ethanol stocks have dropped 7.5%, which is a great start to the summer draw season. Producer margins improved a little today, which keeps our estimates of profitability at "breakeven to better" for most of the Midwest.

Weekly export sales report tomorrow is unlikely to seriously stimulate bullish passions. We are looking for a "pedestrian" week of new corn sales, likely totaling about 750,000 metric tons, give or take. Market will likely be more interested in seeing if China is back in for pork and cotton? Taiwan booked a cargo for summer ship overnight, U.S. or Brazil origin - 90 delta it goes to Brazil?! Plenty of Trade War fluff around given the vast quantity of bilateral deals up for consideration. Dow Jones news reported mid-day that, "The U.S. and China aimed to sign a trade deal as soon as late May." That may be too late in the game to resurrect enough corn or soy business over the summer to significantly impact 18/19 carryout expectations?

Elsewhere, livestock markets were slightly weaker today up-front. Monthly Cattle on Feed report will be pushed up to Thursday; traders are looking for "on feed" inventories to come in near year ago levels. Tomorrow is "Synthetic Friday"; markets close Thursday at the regular time and remain shut until Easter Sunday night. Oddly enough, CFTC data will be released Friday at the usual time.

In the options pit, corn volatility was a little better. Players paid 9 to 10 cents for a whopping 6,000 July $3.70 Calls. Calendar spreads were little changed today; K/N volume slowed a little, but still traded 66,000 times. Corn gained on the beans, but lost a little ground to the wheat. Technically, May Corn has established the $3.55 area as very strong support and the spot to beat to generate more bear momentum. Came within a couple cents of that on the lows today? Initial resistance stands just below $3.70, which we have not come anywhere close to in over one week. Weekly indicators lean negative, while the daily charts are trying to turn back lower after Tuesday's "failure to launch". Choppy!

KJ