Chicago Board of Trade Market News
Outlook: USDA published data on January 10 that was more bullish for corn than soybeans. This data and present market dynamics have put large speculators into a rather uncomfortable situation because they have established a major position that is primarily long soybeans and short corn. There presently appears to be some reluctance to lighten up on this position because speculators started once again selling corn after the March contract rebounded back toward $4.30 per bushel. As a result, the March contract has notched steadily lower throughout this week.
There are prospects for moisture conditions in southern Argentina to improve, which is important as the corn crop transitions into crucial developmental stages. Last week’s data from USDA has already reduced Argentine production by 1 MMT following December heat and dryness. Market Interest in South American weather could intensify if expected moisture disappoints in the next two weeks.
There is some market discussion that impending South American soybean production and increased soybean acreage in North America could weigh on near-term soybean prices. Additionally, declining soybean contracts could negatively influence the price of corn futures contracts. However, the 2013/14 U.S. corn crop is expected to have a carry-out of 1.631 billion bushels and the export sales pace is about 80 percent of the annual forecast, in comparison to a five-year average that is normally closer to 60 percent for this time of year. There have been some significant cancellations by China but that corn has been rerouted – not returned. The shipment pace of corn export sales from the United States is currently right in line with the five-year average.
There will need to be a substantial sell-off in both soybeans and wheat to have sufficient influence to pull nearby corn contracts down below $4.00 per bushel. Aggressively selling the March contracts at $4.25 per bushel in hopes of driving it back down toward $4.10 does not make much sense. Rather, such action seems more indicative of large speculative traders being emotionally attached to short positions in corn even as their negative assumptions are lessened by developing market factors. The outlook for appending to an already large short position in corn is not attractive in the near-term.