Chicago Board of Trade Market News
Outlook: The December corn contracts started off the week with a strong rebound to about $4.85/ bushel, which was about 40 cents higher than the prior-week’s low. That rebound occurred in part because average corn conditions across the Corn Belt were expected to decline, and conditions did decline by 3 points to 61 percent good-to-excellent. Crop conditions could decline again next Monday, but will probably remain above the five-year average, which contains the poor ratings of the two prior years.
There will be export competition this year, but the proportional market share captured by competitors this season is expected to be smaller as stocks of quality U.S. corn rebound. There are legitimate expectations that Chinese corn imports could reach 10 MMT in the approaching 2013/14 season, and the United States is expected to still remain the largest supplier to China.
Numerous buyers are waiting on U.S. basis levels to decline as the harvest approaches. So far, basis in the interior of the Corn Belt and the export market have remained rather stout as harvest approaches. The degree to how much basis will weaken into the harvest will be heavily dependent upon the price action of futures contracts. The speculative community currently has a record short position. If they are successful in eventually driving the December contract down to the $4.00/ bushel region then basis is likely to remain strong by historical standards. On the other hand, if the funds get chased out of their position and futures prices rebound in the harvest period, then basis will weaken.