Afternoon Corn: Bulls couldn't quite find enough to eat today

Afternoon Corn:  Bulls couldn't quite find enough to eat today

The corn market grudgingly gave back a few cents today in a relatively quiet session. A brave attempt to push values another notch lower shortly before the close was greeted by some buying below the market? Managed Money traders likely sold a little corn today but are still believed to be going home a little long tonight. Cash markets were mostly steady; Gulf bids relaxed a little, likely with an eye towards more harvest bushels and a brief pause in activity due to Hurricane Sally.

There was not a lot of fresh news around the grain markets today, which played into the hands of those looking for a correction lower. The absence of drama in yesterday's Crop Progress data, along with some probable light harvest pressure, helped get the ball rolling lower overnight. There were a few small packets of 8 AM corn and bean sales announced, including 120,000 corn to 'unknown'. Before breaking out the champagne, U.S. corn exporters would like to see a little more business booked to traditional buyers, not just China and unknown! There were reports of active trade out of Argentina today; Brazil is busy shipping corn to Asia from sales made earlier this summer. Ukraine is gearing up for a harvest of their own.

The weather headline of the day was Hurricane Sally, which strengthened to a Category 2 storm ahead of probable landfall tonight into tomorrow. 6-10 & 8-14 day maps are warm and dry, which at this point would be considered great pre-harvest and harvest conditions. According to the USDA, 5% of the U.S. crop has been harvested heading into this week, mostly outside of the traditional Midwest. Activity, though, is quickly gearing up in the Heartland.

The weekly EIA report tomorrow is expected to hold mixed feature for ethanol. We would expect production to hold about steady, or perhaps decline slightly with an eye toward light maintenance. Domestic demand should bounce back after an aberrantly low showing last week. With a more 'normal' residual likely, ethanol stocks should swing back to a small build. As we suggested, neither corn nor ethanol markets have benefitted much from recent political tailwinds. Spot producer margins remain a little positive, but implied futures profitability has been eroding slightly since the start of Sept.

Elsewhere, end-user markets were mixed with a slightly weaker tone. Oct Dairy in particular surrendered significant ground after trading back up toward recent contract highs. Outside markets were quiet, leaning slightly positive today. The Fed will deliver the results of its meeting on interest rates tomorrow afternoon (no change from 'near-zero' is the near-universal expectation). Estimates out of China say their hog herd has expanded over 30% yr/yr through end August, which has no doubt contributed to their voracious appetite for feedstuffs this year. They have also encountered less than ideal weather, too, for both growing and storing corn? WTO ruled against U.S. punitive tariffs against China (ostensibly against tech transfer practices), which is expected to change very little.

In options action, volatility was weaker on the break. Nov and Dec call sales were popular today. One player paid just under a penny for 1,000 Oct $3.55 Puts. Another house bought 1,500 Dec $3.50 Puts, paying about 4 ½ cents. Calendar spreads were not much of a feature today. Corn was even on the beans (2-to-1), but gained a little ground on the wheat. Technically, it is increasingly looking like $3.50 corn will be major support for an extended period of time. Futures are trying to break out above $3.65 resistance but are struggling to hold it together. Recent highs near $3.70 could be a problem for a minute, particularly with harvest likely to become a bigger deal in coming days.

KJ