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Published May 17, 2010, 03:40 PM

Corn makes headlines

The consistent rhetoric of China buying U.S. corn became reality according to a newswire report early May 12 that a China National Cereals, Oils and Foodstuffs Corp.

The consistent rhetoric of China buying U.S. corn became reality according to a newswire report early May 12 that a China National Cereals, Oils and Foodstuffs Corp. representative reported it had bought six cargoes of U.S. corn for June through September shipment. If we add in the 240,000 metric tons of corn announced in the previous week’s sales that were marked unknown destinations, it is possible to get the amount of sales up toward 825,000 metric tons. Rumors had China buying six to 10 cargoes; now, traders are speculating that the amount may be as high as 15, which may coincide with the 825,000 metric tons.

As of the evening of May 12, USDA had not confirmed the sale, which leads me to think that the business may have been done under optional origin and will show up as U.S. being the source.

Other news this past week came from farmers in Nebraska and Iowa whose corn is spoiling in the bins. Checking has shown a marked difference from just days ago when the corn looked fine. Moisture is high as well, which surprised many producers who thought putting air on the corn through the winter would dry the crop down. Looks like the farmer who left corn standing in the field is the winner on this one as their corn dried down nicely when they finally got to harvest this spring. Perhaps the corn in the bins never got a good chance to mature?

Farmers took advantage of the May 12 rally to move some cash corn as well as new crop sales when the December corn futures hit 399. Basis levels softened on corn while bean basis firmed a bit. Soybeans managed to push the first decent resistance level of 975 basis the July futures May 12.

When looking, as soybeans adjusted in dollars, the chart shows a slight correction off of the highs that have held this market three times before. However, my timing indicators in percent are starting to get overdone but have yet to turn positive. If a small correction on this chart is all that the market can do, then when the floater (an indicator within the timer) turns positive, the soybeans adjusted by or in dollars will become more expensive for the world buyer to own. The rally in the dollar has been a godsend for the Brazilian farmer as the Brazilian real has fallen sharply vs. the U.S. dollar rally. However, recent corrections have resulted in a stronger real since the May 6 break culminated.

Like the United States, China’s planting season is just getting started and is running 10 to 15 days behind. If this pattern continues, Chinese farmers may opt for shorter season varieties that tend to not yield as well. China will continue to be a major buyer of soybeans, and considering that it started buying new crop earlier than normal it is indicative that it will continue to push aggressively for new crop sales all the way into the U.S. harvest.

On the downside, the Brazilian farmer has been slow to make cash sales, and I would suspect that Brazilian soybeans will be moving into the world market right into our harvest as well. Since the wheat market is where large fund shorts exist, any positive news toward corn should sponsor short covering in wheat. Perhaps wheat is the one that will rally the best because of the shorts involved. Seasonally, wheat tends to put a high in this week and corn tends to soften in the next two weeks toward June 1.

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