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Strategies & Market Trends : Short Selling, Dark Side, Bubble Busting Laboratory

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From: russwinter	4/13/2005 9:30:24 AM
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Commercials are currently long a quite high 93,913 futures and options. I am rolling my remaining half position (rest sold on rally to high 2.20's) over to July, and may add opportunistically if the commercial longs continue to build at these levels. Pre-Opening Corn Market Report for 4/13/2005 May corn was down 1/2 to 1 cent overnight with demand concerns helping to pressure. The good weather for an early start to planting corn in Illinois and export demand concerns due to potential non-GMO approved contamination of the export pipeline are potentially bearish forces over the near term. However, the market appears oversold, and with a significant production uncertainty ahead and a willingness of US producers to hold hefty stocks and wait for higher prices, the market does not appear to be in a position to add another leg down on a test of the February lows. While the market was surprised with the fast planting pace for southern Illinois, traders also view the slow pace of planting in the southeastern US as a reason to believe that up to 500,000 acres may not even get planted. The governors of 33 states are pushing to expand a proposed federal mandate for use of ethanol. The mandate for 5 billion gallons usage by 2012 was agreed upon last year but the governors hope to push the mandate to 8 billion gallons. Current production is near 3.7 billion gallons and a 5 billion target as of 2012 is not much of a goal given the expansion pace. The EU is considering requiring the US to certify that all exports of corn gluten feed to Europe are free of illegal GMO strains. The action is deemed possible after last week's news that some unapproved biotech corn seed may have been sold in the past few years. Support for May corn comes in at 205 and 203 3/4 with resistance at 208 3/4 and 210 1/2. The oversold condition of the market combined with follow-through buying after the strong close Monday helped support the early gains yesterday. A warmer and drier outlook into the coming weekend helped to provide selling resistance with talk of improving conditions to plant corn. In the state report, Illinois producers reported that 14% of the intended corn acres are already planted as compared with 4% last year. This came as a bearish surprise. Talk that South Korea is having quality and shipping delay issues with corn purchased from China helped to provide some support. The 6-10 day forecast for the Midwest looks warm but wet in the western cornbelt. The cash tone was firm with producer selling slow. Israel is tendering to buy 36,000 tonnes of US corn. While there is nothing magical about the February lows, it appears unlikely that the market has enough selling interest to see prices significantly below those levels before the new crop is even planted. The market remains in an oversold condition, and while the fundamentals could turn more bearish into the late spring, there seems to be enough supply uncertainty to forge a near-term low soon.

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