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Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Corn bulls remain optimistic as demand is strong. Not only are ethanol margins some of the best we have ever seen, and feed usage improving, but US export sales are now close to 1.0 billion bushels and already totaling more than 70% of the annual USDA forecast. Bulls are also excited to see Informa lowering their estimates for Brazilian corn from 70.6 million tons down to 70.1 million tons yesterday. I am assuming the 500,000 ton reduction is because of an increase in soybean production, which was pushed 1.3 million metric tons higher. I should also point out the Argentine corn crop is looking like it could be 1-2 million metric tons lower than last year on fewer planted acres (simply too wet in several areas and not as profitable to plant corn). Keep in mind the Brazilian government just released data that showed corn prices in the main production area of Mato Grosso have dropped by about 40% this year, and now stand at or beneath $2.05 per bushel, well below what is thought to be a $2.25 to $2.50 break-even price. Helping to offset the corn reduction in South America however is a one million metric ton increase for corn production out of Ukraine. Setbacks in corn production out of Europe were also equally offset by gains out of Russia. Net-net there just isn't really much change to the global picture. Nearby traders continue to watch China play carnival games with US corn. As of this morning there are rumors that 6-8 US corn cargoes have now been rejected. Even though you can almost guarantee the shipments will eventually make it inside China, until the shenanigans with the importers and GMO varieties are sorted out, its hard to imagine a lot of new buying of US corn by the Chinese. With funds holding a near record short position, it seems any type of nearby bounce will have to be fueled by talk of more profit taking and liquidation ahead of the holidays by the big money managers. The "demand" card is certainly in play, but I am afraid we are going to need some production problems or bad weather cards to help us build a truly bullish hand. Producers should continue to use the small interim bounces as an opportunity to reduce more risk. Specs will more than likely be looking to sell a bounce to the upper end of the range ($4.45 to $4.50 vs. the MAR14 contract). Click here for my daily market comments...
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