Afternoon Corn: Mixed day of trade, closing slightly higher

Afternoon Corn:  Mixed day of trade, closing slightly higher

An uncertain and two-sided start to the week for corn, managing to somehow look 'strong like bull' at times, and 'familiarly disappointing" at others. Futures would finish the day fractionally better, which was right in the middle of a five cent intraday range. We would label this a tentative affirmation of Friday's eight cent rally, which was the best single day of gains for the market seen since the October crop report, almost two months ago. Cash trade was steady/firm in the West and Gulf but moderately lower in the East.

CFTC data after the close was interesting, reflecting significant fund position changes following December options expiration. Through Tuesday the 26th, large non-commercial (aka "Large Spec" or "fund") traders were viewed net buyers of nearly 22,000 corn. Our player sheets estimated them as net sellers of 15,000! The report reflected a whopping 15.7% drop in open interest, which in our view helps confirm the Dec options expiry as a huge influence on this particular CFTC report. Two-thirds of the purchases were seen as 'short-covering', with the remainder new longs. When including the most recent updates, we would now estimate the funds are heading into tonight net short about 130,000 combined futures and options.

There was not much fresh news around to start the week. "Trade War" sentiment was a little negative today, as the Chinese reiterated calls over the weekend to remove existing U.S. tariffs before they would proceed with the so-called "Phase One" deal. It is possible they hardened their stance after President Trump signed a bill supporting Hong Kong protestors late last week? This soured the 'macro' mood today and likely helped reversed an overnight rally attempt in beans. Supporting corn was the 'afterglow' of Friday's positive trade, as well as the continued absence of Dec deliveries.

U.S. harvest weather remains quite miserable. USDA Crop Progress data today after the close found the expected 'token' amount of progress. 89% of the U.S. corn crop was seen collected, advancing 5% wk/wk. This would imply over 9 million acres were left out in the field, or roughly 1.4 billion bushels. North Dakota was the standout with 2 million acres left, and it is growing ever-less likely much more of this will be collected before winter fully sets-in. In fact, they may argue winter is already here!

The mid-day grain inspections report effectively succeeded in throwing a wet blanket over a mid-morning rally effort. The report found just 428,856 metric tons (mt) of corn shipped for the week ended 11/28. This compares to 616k the prior week and was less-than-half the prior year week's 1.064 million mt (mmt) total the prior year week. YTD corn shipments stand 6.04 mmt versus 14.23 mmt in the year ago period. The report included virtually no corn shipped off the PNW, which has been a familiar theme of late. We still see U.S. corn export activity improving early in 2020, particularly with Brazil believed close to sold-out. A separate report by Brazil's gov't found Brazil exported 4.288 mmt of corn in November, down from 6.501 mmt in Oct, but close to the year ago month's 4.365.

Elsewhere, end-user markets were mixed; hogs didn't like the China uncertainty, finishing $2 lower in Feb, while cattle were near unchanged, and dairy did not care, closing higher. Ethanol tried to rally some early after being closed on Friday, but struggled to hold, and finished near unchanged. Spot ethanol producer margins remain decent, but forward margins are more difficult to pin down in a profitable manner. South American weather remains a relative nonevent. Of the two, Brazil is in better shape, while Argentina is trying to limp through a dryer stretch.

In the options pit, volatility was sharply unchanged to start the week. Very quiet day overall. One player bought 500 Jan 380 calls at 6 7/8's cost. Another house sold 200 march 450 puts at 68 cents; some see this as a big commercial hedging some exposure. Calendar spreads were steady/firm. Corn gained on the beans and the wheat. Technically, the corn market has found some support against last week's lows, which held just over $3.70. The summer lows are just a nickel away from that. $3.90 CH resistance is looking more difficult to erase, but we are oversold and due a bounce, which we appear to be starting to get.

KJ