Afternoon Corn: Quiet end to a quiet week

Afternoon Corn:  Quiet end to a quiet week

Quiet conclusion to a quiet week for the corn market. Daily volume was reminiscent more of Christmas than the first official week of fall. Futures would end the day two cents lower, and for the week closed almost exactly unchanged. Cash trade was mostly steady; nearly all interior processors have adjusted their bids to reflect new crop, though some have taken this farther than others.

CFTC Commitment of Traders data after the close played-out close to expected for corn. For the week ended 9/21, large non-commercial (aka "Large Spec" or "fund") players were net buyers of 5,265 corn, nearly all of which was short-covering of existing positions. Commercials (harvest?) and index funds were small net-sellers. When including recent activity, we think funds are heading into the weekend net long about 160,000 delta-adjusted corn futures.

After a couple of 'all clear' days, outside markets were a little more turbulent today, though most of this tumult was centered on crypto-currencies. Stocks look like they will close about steady today (but still slightly lower for the week), and the US Dollar recovered most of the prior day's losses (and is due to finish a little higher for the week). Heading into the weekend, there remains lingering concern about just how far China will go to mitigate the Evergrande situation. Most experts doubt even a worst-case scenario will create significant 'contagion' for western financial markets, but it could have some bearing on commodity demand and sentiment for a time?

On the weather front, it still looks like a fantastic week-plus ahead for harvest and maturation in the U.S. Some surprise there was not a lot of 'pre-hedging' in front of the weekend? Weather in South America seems to be close to normal for this time of year, though nearly all areas could use a drink at this point. First crop planting efforts continue at a relatively rapid pace in both Brazil and Argentina.

If meat stats are of interest, this was the afternoon for you. Cattle on Feed numbers came in a little high ("on feed" at 99% vs. 98% expected), with strong placements (102% of year ago vs. 99% expected). Marketings were in-line at 100% of year earlier. The Quarterly Hogs and Pigs data found less critters around than expected. Sept 1 "All Hogs" were seen at 96% vs. 98% expected and 98% in June. Current farrowing intentions arrived a little light, too, though Dec-Feb intentions were 101% of year ago vs. 100% forecast. At first blush, looks a little negative cattle but friendly to hogs, particularly at the front-end of that curve (Oct was up sharply Fri)?

Elsewhere, the EPA had not yet published any biofuel mandate guidance as we went to press. Ethanol featured a strong close to the week in prompt positions, though deferred contracts (ie: 2022-dated) fell well behind. Spot margins remain amazingly good at around ~40 c/gal, but futures imply 'breakeven at best' margins beyond November. Taiwan was in for corn overnight, while Korea's KFA picked-up a cargo of corn after passing on a number of tenders lately. There were no 8 AM sales flashes today, and the only item of note for corn this week was a small mid-week booking to Guatemala. The USDA will publish Quarterly Grain Stocks data this coming Thursday.

In the options, corn vol was mostly steady today, excepting the Nov which was weaker as it fell victim to "The Strangler" late week. Oct options expired with little fuss on the close today. Calendar spreads were a smidge weaker today, particularly between crop years. Corn lost to both the beans and the wheat today. $5 stands as major Dec Corn support, though initial support around $5.15 has contained recent breaks. Initial resistance is still operative around $5.35, which has also held recent strength. Pushing over this level would project a further run to old overhead in the $5.45-5.50 area, basis CZ. Daily and weekly indicators are trying to flip to a more positive posture?

KJ