Dec corn is again testing its contract low, and via the trade’s average guess on US corn yield and ending stocks the market is gearing up for looser US & world balance sheets on Thursday. The trade’s guess on US corn production rests at 14,170 Mil Bu, virtually unchanged from the USDA’s September estimate.
ARC does acknowledge that NASS’s yield in September will be close to the final number, and that corn lacks a meaningful story – but funds this evening are very short. We estimate managed funds net short position this week at 155,000 contracts, which is actually a record for the week, and compares to 131,000 just ahead of the Oct report in 2016. The US farmer certainly is not selling cash corn at this price.
Crude has recovered its early week losses, as have ethanol futures, and we note Brazilian ethanol prices are now bid $.40/Gal (27%) above US origin, which on paper offsets Brazil’s tariff on US imports. There’s also talk of China importing ethanol amid rising prices and a need to fight winter smog.
Fundamentally, a neutral outlook is advised, and so end users should use any post-report weakness to extend coverage.
