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CME: Corn Finished Up on Thursday

12 September 2013

US - December Corn finished up 3 1/2 at 472 1/2, 1 off the high and 6 1/4 up from the low. March Corn closed up 3 at 484 3/4. This was 5 3/4 up from the low and 3/4 off the high.

Trade volume was consistent with the levels all week and maybe a tad lighter as the market looked ahead and positioned for the USDA report tomorrow. December corn traded near the unchanged midday but forged a new high for the move at the closing bell. It's widely expected that the market will see a decline in the US 2013/14 corn yield and production but ending stocks estimates lean bearish amid a questionable supply outlook. Talk that China will have another record crop and favorable supply and export prospects out of Brazil, Argentina, and Ukraine all seem to be limiting the demand bull case for now. Lower prices will bring in additional demand but the strength of a feed grain stockpiling program by China is an unknown.

Ethanol demand will see a nice rebound from 2012/13 levels with 2013/14 estimated at 4.9 billion bushels. This would be the 3rd highest demand projection on record following 5.019 in 10/11 and 5.011 in 11/12. Bearish traders argue that the current RFS and blend wall will keep an upside lid on demand at or near 5 billion while a lower gasoline usage trend by US consumers and an unknown deferred margin outlook could mean lower usage may be ahead. Spot production saw a nice rebound over the last week as commercials roll corn bids to the December and basis begins to soften.

Production for the week ending September 6th averaged 848,000 barrels per day, up 3.5% vs. last week and up 3.9% vs. last year. Total ethanol production for the week was 5.936 million barrels and this was the first reporting week of the 13/14 crop year. Corn used in last week's production was estimated at 76.32 million bushels, below the 80.6 million bushels needed each week to hit the 13/14 forecast of 4.9 billion bushels. Stocks as of September 6th were 16.3 million barrels, up 0.33% vs. last week but still down 14.2% vs. last year.

November Rice finished up 0.14 at 15.575, equal to the high and 0.055 up from the low.

Soybeans

November Soybeans finished up 3 1/4 at 1358 1/4, 3 1/4 off the high and 9 1/2 up from the low. January Soybeans closed up 2 3/4 at 1358. This was 9 1/4 up from the low and 3 1/4 off the high.

December Soymeal closed up 2.8 at 428.0. This was 5.3 up from the low and 0.5 off the high.

December Soybean Oil finished down 0.11 at 42.96, 0.39 off the high and 0.05 up from the low.

The midday action was mostly higher for the soybean market with upside gains being led by the November contract. September soybeans lost to November as the CIF market leaked lower. The trade has a cautious view of the market leading into the report tomorrow given the poor weather in August that has taken a toll on soybeans across the country. Some areas likely saw some relief overnight with showers stretching across parts of NE, IA, and MN although it's well known that the optimal time frame for the crop is in August and weather was far from favorable for this period.

There were reports of farmers harvesting soybeans in areas of IA and IL today that had yields below year ago levels due to the "flash drought" in August. For these reasons, the market is looking for a decline in yield and production in tomorrow's USDA report. Meal and soybean premiums are beginning to soften which helped pressure spreads. World production remains a bearish long term influence with South American projected to have record supply in 2013/14 and even world production is expected to climb to a record level of 281.71 million tonnes. World ending stocks may decline from the current record high of 44.83 million tonnes tomorrow.

Wheat

December Wheat finished up 1 1/2 at 648, 4 1/2 off the high and 6 up from the low. March Wheat closed up 1 1/4 at 659. This was 6 up from the low and 4 1/4 off the high.

Wheat futures edged lower midday and wheat vs. corn spreads broke to the downside but some midday short covering helped to lift the market higher. Bears held gains in check and the market finished off session highs. European wheat futures were lower overnight as the market continues to trade under the influence of surging production for areas of France, Germany, and the Black Sea although export demand looks supportive for the overall region long term.

India is also getting back into the export arena and is aiming to sell close to 2 million tonnes from government warehouses this year. India's inventories are sufficient for domestic usage although the lack of investment in storage infrastructure generally means that a fair amount of their supply goes to waste and ends up being rotten.

A private satellite agency estimated that world wheat production would come in at 702 million tonnes in 2013/14, down from the record USDA forecast of 705.38 million. The trade is looking for a very modest decline in world ending stocks in tomorrow's USDA report from 172.98 million tonnes which is a 5 year low. The KC market gained on Chicago after the USDA reported that US private exporters sold a total of 120,000 tonnes of US KC wheat to Nigeria for 2013/14. KC wheat ending stocks are sitting at 6 year lows after a below average harvest this year. Export demand remains strong, particularly from Brazil.

December Oats closed up 3 1/2 at 322 1/4. This was 5 1/2 up from the low and 1/4 off the high.


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