Chicago Board of Trade Market News
Outlook:October 2013 will be the first month since 1866 that USDA will not publish a monthly update. USDA employees are returning to work after the U.S. government shutdown and market data will become increasingly available. The release of data could heighten price volatility as adjustments are made to enourmous offsetting positions in corn futures between short speculators and long commercial traders.
Short speculators have built their position in anticpation of the release of data showing favorable yields that indicate a record corn crop and allow for ending stocks to rebound above 2 billion bushels in the present 2013/14 season. Commercial traders too do not seem to be intimidated by such a carry-out, which was rather common in the past. Of course, corn prices were lower in those historical periods but so were the costs of production. As well, there was less storage space available in the past than there is presently.
Current basis levels in the Corn Belt, which are above the historcal norm for a bumper crop, imply that farmers are feeling no pressure to sell even as various global buyers are desiring to secure U.S. stocks of corn. The stability of the U.S. basis may be one reason that cash prices in competitive regions, such as the Ukraine, have stabilized. It is also becoming increasingly apparent to cash related market participants that Brazilian farmers are going to switch a substantial amount of their second crop corn into a double crop of soybeans. The large speculative traders appear less cognizant of such factors and have been more focused on maintaining negative chart patterns until the next WASDE is realeased on November 8, which they hope will then justify further selling into new lows. In the near term, as news is released of large export sales and stable basis, speculators may start to increasingly wonder if the size of any prospective sell-off really justifies the further building of their already large short position. Such second guessing could cause corn contracts to experience somewhat of a spike prior to the release of the November WASDE.