Afternoon Corn: Start higher, end lower, on Big Friday

Afternoon Corn:  Start higher, end lower, on Big Friday

The corn market was off to the races early, trading as much as five cents higher overnight, making new highs for the move. Futures may have briefly gotten ahead of themselves, as the market stumbled during the day, eventually settling-out a penny-plus lower. Despite today's downtick, the corn market still managed to end the week with 7 cent gains. Corn has only closed lower once out of the last eleven weeks, rallying over $1/bu from the weekly low to its high. Cash trade remained mostly steady/higher, particularly for deferred Gulf time slots.

CFTC Commitment of Traders data after the close found the expected aggressive fund buying in corn. For the week ended 10/13, large non-commercial traders (aka "funds") were net buyers of 37,791 corn; this comprised nearly 24k new market longs and 14k less shorts. All other market participants were sellers (especially commercials). When including recent activity, we estimate the funds are heading into the weekend net long about 195,000 combined corn futures and options.

The weekly export sales data was rather unimpressive; just 655,200 metric tons of corn were booked to a hodge-podge of small buyers - 140k-200k each to Mexico, Colombia, Japan, and China. Traders were looking for right around 1 million in total new sales. This takes total sold + shipped for 20/21 to 26.5 mmt, which compares to 10.4 mmt on the books this time last year. For good measure, there was also 128,000 metric tons of corn reported to Mexico at 8 AM. The week brought mixed export news; China was back in for a big chunk of U.S. corn, but other Asian buyers remain absent, electing instead for South American supplies.

After a good start to harvest, it appears like U.S. weather will tilt a little cooler and wetter, which should slow things down. We suspect some of today's day session selling was tied to pre-hedging in areas that will avoid weekend showers? Better weather prospects for Argentina may have also weighed. Brazil is also tilting a little wetter, though Mato Grosso province in particular needs more rain. China's harvest weather is improving.

Elsewhere, end-user markets had a mixed week - ethanol and dairy notched very positive weekly closes, while cattle featured the greatest decline, falling more than $2. Early 2021 feeder cattle futures finished almost $5 lower for the week. Similar to corn, spot ethanol futures traded to the highest levels since the start of the year and have done a decent job of late keeping up with the corn advance. We still think most ethanol producers are earning 5-10 c/gal spot profits, which has been little changed over the past 4-5 months.

In options action, volatility was firm early, but set back to unchanged once the market settled down. Dec $3.90 Puts were popular today, trading 3,000 times at 6 cents. Calendar spreads were weak today, giving back some of the week's gains. Corn gained on the beans but lost to the wheat for a second day. Technically, the corn market affirmed initial support just below $3.90 early week. Futures are currently trying to hold-on to the rally above psychological resistance at $4. $4.10 CZ held today's advance and will be the next level to beat for market bulls. Corn is a little overbought with a 73 RSI.