Fund Buying Will Determine How Far and Long the Corn Price Reovery Extends

* Funds continue to buy corn. Corn futures have closed higher each of the past eight days. While USDA’s January crop reports last Friday gave traders a fundamental “reason” to be buyers, it’s been fund buying that has been the real catalyst for the price strength. Over that eight-day stretch, funds have been net buyers each day, purchasing a total of 65,000 contracts (325 million bushels). Funds have also been net buyers in soybeans and wheat during that eight-day stretch, but not nearly to the degree they have bought corn. The long and short of it: Fund buying will arguably have a greater say than any fundamental factor in how long and far the corrective price recovery in corn futures extends. * Corn has demand issues. The struggles with corn export demand have been widely documented. Global end-users have been seeking alternatives to high-priced U.S. corn for months. Ethanol demand is also struggling. U.S. ethanol production slowed to 784,000 barrels per day (bpd) for the week ended Jan. 11, according to the Energy Information Administration. Weekly ethanol production declined 42,000 bpd from the previous week and was the lowest level since the agency started releasing weekly data in June 2010. The long and short of it: With corn demand struggling, it will be harder to find sustained buying interest and there’s even more emphasis on fund buying for support. * Light rains in Argentina, but the forecast is dry. Areas of Argentina’s main growing region received light and scattered rains yesterday. While this will help crops that received the precip, temps remain above normal and moisture requirements are on the rise. The 10-day forecast calls for below-normal precip and mostly above-normal temps across virtually the entire grain belt. The long and short of it: Argentine weather is quickly becoming “the” key fundamental factor in the soybean market.