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CME: Corn Futures Closed Lower Wednesday

08 August 2013

US - September Corn finished down 4 at 468 1/4, 8 off the high and 1 up from the low. December Corn closed down 1 at 458 1/4. This was 2 up from the low and 6 1/4 off the high.

Profit taking ahead of the weekend and the USDA report next Monday helped to support the market early in the session but the bearish technical trend remains formidable and the bears ended up pushing December corn lower into the close.

Traders see production and ending stocks for 2013/14 edging higher next Monday but trade talk is that much of this supply increase may have already been priced into the market. Profit taking in long wheat vs. short corn spreads was also seen as a supportive influence midday.

Weather has a mixed bias with good rainfall expected from KS east into KY and TN over the next 5 days. The rainfall will hit key growing regions but the pattern shifted further south overnight offering little to no precipitation for dry regions of IA and southern MN. NE will benefit from showers as well.

Temperatures remain nonthreatening as corn pollinates across the Corn Belt. The FOB basis in the Gulf was up 7-8 cents from yesterday with November cargos indicated at 80 over the December contract. This is compared to Brazilian cargos at the Port of Paranagua valued at option price the December contract. The 80 cent spread in the cash price is equivalent to $31.50 per tonne.

The premium US corn holds to other world origins is seen as a bearish influence into the 4th quarter of this year. Ethanol production for the week ending August 2nd averaged 853,000 barrels per day, up 2.5% vs. last week and up 4.4% vs. last year.

Total production for the week was 5.97 million barrels. Corn used in last week's production was estimated at 89.6 million bushels and cumulative corn used for this crop year is 4.2 billion bushels.

Corn use needs to average 103.14 million bushels per week to meet this crop year's USDA estimate of 4.6 billion bushels. Stocks as of August 2nd were 16.72 million barrels, up 1.6% vs. last week and down 10.4% vs. last year.

September Rice finished down 0.35 at 15.345, equal to the high and equal to the low.

Soy Futures Closed Higher

August Soybeans finished up 3 1/2 at 1327 3/4, 7 1/4 off the high and 14 up from the low. November Soybeans closed down 1 1/2 at 1165 3/4. This was 3 1/4 up from the low and 9 3/4 off the high.

August Soymeal closed up 4.3 at 400.3. This was 4.6 up from the low and 2.0 off the high.

August Soybean Oil finished down 0.47 at 41.64, 0.45 off the high and equal to the low.

November soybeans attempted to hold the overnight upside momentum but ultimately failed to follow through with new lows put in by midday.

The contract closed lower on the day but old crop futures pushed higher as spread buying came back into play due to the firm basis in the processing market.

Soybean oil was sharply lower today following the EPA statement released yesterday which could indicate that the advanced biofuels portion of the mandate is at risk of being revised lower in the next year. Funds continue to liquidate positions ahead of the USDA report next week despite trader estimates for the 13/14 carryout to be revised lower from 295 million bushels.

The trade estimate is near 265 which is the same forecast the USDA issued in the June report. This would still be the largest carryout since 2006/07. Demand from China continues to look strong with another 2013/14 sale reported this morning for 220,000 tonnes.

For the week, China has bought 340,000 tonnes of new crop soybeans from the US. Many still believe that the USDA import demand estimate of 69 million tonnes is overstated given that it's 10 million higher than in 2012/13.

The Chinese are still expected to auction off domestic reserves this week to crushers although the cost to import supplies from Brazil is cheaper.

Wheat Futures Closed Lower

September Wheat finished down 7 at 643 1/2, 9 1/4 off the high and 4 1/2 up from the low. December Wheat closed down 6 1/2 at 656 1/4. This was 5 up from the low and 9 off the high.

Wheat futures ended the day sharply lower and the December Chicago contract forged a new low for the move. Outside markets hit the skids with US equity markets trading down and the dollar moved lower for the 3rd straight day, mostly against a strong Yen which was up over 1%.

Overnight markets were rather negative on a fundamental basis for the market after it was reported that US wheat was once again shoved aside by Iraq for cheaper cargos out of Australia and Canada. Brazil and China remain the strongest export demand influences in the KC and Chicago wheat markets.

European wheat futures drifted lower overnight, mostly in line with the US markets but harvest pressure is beginning to weigh on the cash market as shown by Frances surprisingly competitive offer on the Egypt soft wheat tender this week although it was not booked.

Russian farmers have harvest 31 million tonnes of wheat as of August 6th, up from 24.7 in the same period in 2012.

The average yield is estimated at 3.08 tonnes per hectare vs. 2.34 last year. Russian officials claim their harvest will be no less than 50 million tonnes against the current USDA forecast of 54 million tonnes. Wheat vs. corn spreads setback today as traders trimmed positions ahead of the USDA report next Monday.

Fund traders still hold a substantial short position in KC and Chicago wheat and hold a record short in the corn market. Thoughts that US wheat needs to be priced out of feed rations in replacement of corn is supportive to the spread long term.

September Oats closed up 12 1/2 at 352 1/4. This was 13 1/2 up from the low and 7 1/4 off the high.

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