Linn Group Morning Corn Comment
CHICAGO - Jul 29/10 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.
The corn market moved higher on Wednesday as the wheat market dragged corn higher and brought out a round of short covering as traders are worried about the lack of feed wheat causing more demand for corn. The December contract closed up about 13-14 cents which was 3-4 cents off the lows. The corn market opened up strong and continued to be strong throughout the session as the outside markets were a non-factor, this was all about wheat and short covering. The news out of Russia and Europe was lower crop yields that would prompt less exports, maybe no exports, thus bigger demand for other feed grains, i.e. corn. The fundamentals for corn remain bearish, with big yields coming here in the US and good weather forecasts, but right now the market is scared and pushing higher. Also, one trader pointed to the EU approving 6 varieties of GMO corn for import and consumption, but not cultivation. This will allow not only corn to be imported into the EU, but also beans and meal because those were being rejected if there was GMO corn dust on the tanker. This is probably being done because there won't be feed grains to be imported from FSU. Regardless, this has caused some to raise their export numbers and eventually lower the carryout. The volume was pretty good at 253,000 and funds were buyers of 12,000 contracts. Overnight, the corn market continued to move higher as wheat leads the way and we are seeing more liquidation. The December contract closed up about 5 cents higher near the highs of the session. The outside markets were supportive with the US$ down over 50 points and the stock market higher. The weekly export sales remain good at 960,000 mt which was within expectations but will show the market the world is on notice and buying US corn. The story remains the weather problems in FSU and the EU which are driving wheat and all the other feed grains. There are big wheat inventories across the world, so this shortage could really support corn because it doesn't have big carryout across the world. The corn market is still finding plenty of farmer selling as corn goes higher as they are looking at the big US crop and not the world situation. The December contract is approaching the psychological $4 level again and we will see if it can close above that level. The corn market will be called 5-7 higher this morning because of good corn and wheat export sales. Wheat is the driver right now, but corn could be explosive. There are some weak shorts in corn that sold because of the good weather in the US and those will the first to exit this market if they haven't already. Be careful staying short corn, or make friends with your banker. Globex Overnight Contract Last Net Change High Low Volume ZCU10 381^6 5^4 382^2 375^4 5736 ZCZ10 396^2 5^4 396^4 390^0 15598 ZCH11 409^2 5^6 409^2 403^0 2483 Early Opening Calls: 5-7 cents better Top News **USDA Corn 09/10 Export Sales Net: 432,300 mt; 10/11 Net: 528,100 mt; expected 750k-1.1 mln mt -- 20-25,000 mt of US, Latam, S Africa, or Canadian Corn is being tendered for by Abu Dhabi in a tender that closes today. Shipment for LH Sept to FH Oct -- Kellogg reported 2Q revenue at $3.06 billion, while net income for the quarter was reported at $302 million or 79c/share. The cereal maker noted income was impacted by the recall and lowered 2010 guidance -- CME Group on Thursday announced 2Q revenue of $814 million and net income on a per share basis of $4.11/shr. Operating margin during the quarter was 63% -- US Coast Guard says efforts to remove stricken barge north of Memphis on the Mississippi River continues and so does the one-way traffic restriction -- Bunge Ltd posted 2Q revenues of $10.9 billion and net income during the quarter totaling $1.79 billion or $11.15/share. They noted worldwide crush as challenging and noted wheat millers were still under pressure -- Romania's farm ministry says 75% of the grain crop has been harvested, but notes precip & flooding have reduced yields. They estimate 4.4 mln mt of grain has been harvested so far, they're expecting a total of 5.8 mln mt for the season -- Pending Tender: Cyprus seeking 60,000 mt of opt origin Barley, with an option for 12,000 mt additional, in a tender that closes on Monday, July 26. Shipment is expected between Sept 15 to Feb 10, 2011 -- Dalian Jan corn futures were 1 yuan better at 1,935 yuan/mt. -- Liffe Nov corn futures were off -0.25 euro at 174.50 euros/mt. -- Globex Corn Vol: 231,392; Pit Vol: 14,699; Open Interest change: - 3,542 -- Weather: 6-10 Day Forecast: Above Normal Temps. Above Normal Precip. -- Outside markets: Energy Complex -0.18 at $76.81; Gold & Silver: +1.3 at $1162.3 & +0.099 at $17.540; US $ -0.480 at $81.830 Cash Markets -- CIF Corn steady off 3. July +27 to +33, Aug. +29 to +35, Sept. +47 to +50, Oct. +48 to +51, Nov. +49 to +52, Dec. +53 to +55, Jan. +41 to +45 TREND: Tightening world feed grain supplies is in the making and this is an interesting offset to the US situation with growing crop size and pending harvest starting in the south already and spreading to the north over the coming 3 to 4 weeks. Lot of the corn crop is already heading into dent which makes it harder to hurt yields from this point forward. The US farmer is still in a selling mood even if the activity has slowed from the levels seen last week. Triggered sell stops last week when it broke below the 3.85 reactionary low. It only spent two days there holding the Fib retracements and the 50 day moving avg. This chart is still based primarily on the huge reaction off the June acreage and stocks report. The roll over takes this chart to a test of 4.43 if and when it gets above the July highs at 4.10. The actual count off this big leg takes the market to 4.60? The new crop carries have widened as the crop grew but now has firmed some on stronger new crop corn basis and concern that exports could grow more than supply. Futures trading involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future trading results. Trading commentary and analysis is based on information taken from trade and statistical services, news services, and other sources which we believe to be reliable. We do NOT warrant that such information is accurate or complete, and it should NOT be relied upon as such. Our policy is to publish market research that is objective, clear, fair, and not misleading. Trading commentary and analysis reflects our good faith judgment at a specific time and is subject to change without notice. There is no assurance that the advice we give will result in profitable trades. All trading decisions will be made on a strictly unsolicited basis by the account holder. If you have any questions or want to discuss specific trade recommendations, contact me directly. Jim Riley Linn Group 877-787-6278 jriley@linngroup.com www.linngroup.com/
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