The Hightower Report

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NEAR-TERM MARKET FUNDAMENTALS: The corn market closed higher for the third day in a row yesterday in conjunction with moderate buying support from funds. Corn followed soybeans and meal higher tied to the higher than expected crush rate for November. This in turn was tied to improved feed demand in the US which may be following an improving economic outlook according to many traders. This has not had a dramatic impact on corn demand yet, and corn lagged on yesterday’s rally. But export sales have moved higher for corn in 2 of the past 3 weeks and the USDA announced a sale of 116,000 tonnes of corn to an unknown destination yesterday morning. In addition, South Korea’s biggest feed maker is looking to buy up to 165,000 tonnes of corn along with 55,000 tonnes of feed wheat and 4,500 tonnes of barley. South Korea may have some catching up to do in the feed department according to one analyst since they announced today that imports of corn are down 19% to 6.6 million tonnes for the first 11 months of this year. South Korea is normally a very consistent importer and is the world’s third largest buyer. The USDA weekly crop update yesterday afternoon showed overall harvest progress at about 4% for the week last week to 92% harvested. Illinois, Indiana and Iowa were at 90%, 96% and 96% respectively. Nebraska and Minnesota were each at 91% complete. However, the biggest laggard was North Dakota at just 60% harvested, followed by Wisconsin at 85% and South Dakota at 82%. Forecasts call for dry weather across major harvest areas of the US through later this week with the exception of some light and scattered rains moving into the west central Corn Belt by Friday. Weather in Brazil has been mostly dry in the corn-growing provinces of Parana and Rio Grande do Sul which is welcome. Conditions are expected to be mainly dry over the next 2-5 days with a few light showers and some localized thunderstorms. This week’s export inspections in corn were 28.1 million bushels, about in line with trade expectations. An EPA spokeswoman indicated yesterday that the agency will issue final rules on revisions to the renewable fuel standards in early January.

TODAY’S GUIDANCE: The 3-day surge higher is a positive technical development and corn seems to have the longer-term fundamentals to push higher. However, the surge higher in the dollar might encourage some fund selling today. First support is at 402 and 396 1/2 for March corn with resistance at 413 and 425.

CORN:

Net weekly export sales for corn, came in at 440,600 metric tonnes for the current marketing year and none for the next marketing year for a total of 440,600.

As of March 12, cumulative corn sales stand at 70.7% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 72.1%. Sales of 512,000 metric tonnes are needed each week to reach the USDA forecast.

WHEAT:

Net weekly export sales for wheat, came in at 213,800 metric tonnes for the current marketing year and 22,000 for the next marketing year for a total of 235,800.

As of March 12, cumulative wheat sales stand at 93.2% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 89.7%. Sales of 159,000 metric tonnes are needed each week to reach the USDA forecast.

SOY COMPLEX:

Net weekly export sales for soybeans came in at 143,300 metric tonnes for the current marketing year and 196,500 for the next marketing year for a total of 339,800.

As of March 12, cumulative soybean sales stand at 87.0% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 87.6%. Sales of 169,000 metric tonnes are needed each week to reach the USDA forecast.

Net meal sales came in at 33,400 metric tonnes for the current marketing year and 40,800 for the next marketing year for a total of 74,200.

As of March 12, cumulative soybean meal sales stand at 60.0% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 61.3%. Sales of 106,000 metric tonnes are needed each week to reach the USDA forecast.

Net oil sales came in at -8,000 metric tonnes for the current marketing year and none for the next marketing year for a total of -8,000.

As of March 12, cumulative soybean oil sales stand at 58.5% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 77.9%. Sales of 10,000 metric tonnes are needed each week to reach the USDA forecast.

COTTON:

Net weekly export sales for cotton, came in at 204,200 running bales for the current marketing year and 5,400 for the next marketing year for a total of 209,600.

As of March 12, cumulative cotton sales stand at 93.6% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 80.5%. Sales of 36,000 running bales are needed each week to reach the USDA forecast.

BEEF:

Weekly US beef export sales for the week ending March 12 came in at 13,300 metric tonnes making it 147,300 metric tonnes for the year. This compares to year ago weekly sales of 12,300 metric tonnes and 162,700 for the year. Before Mad Cow (2003) cumulative sales as of this week were 251,800 metric tonnes.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The market is probing for a near-term low and a potential tightening of supply for the 2009/2010 season appears to be the factor which has helped provide underlying support in a period of weak international demand. Until the world economy bottoms, the outlook for cotton demand remains weak. However, there is talk of another 10% drop in US planted area for the coming season which is down from a 25-year low in plantings last year. In addition, land will be lost in the higher-yielding delta region and drought conditions are developing in Texas and California. Some rains in Texas this week may have helped ease dryness concerns but it will take more than one or two storms to bust the drought. The market inched higher in very quiet trade yesterday as traders saw the USDA supply/demand news as somewhat important but the focus of attention is on the end of the month planted acreage report. The US supply/demand data was mostly supportive while weakness in world demand kept the world numbers negative. World cotton consumption is now pegged at 111.1 million bales from 112.6 million last month. The USDA lowered US domestic cotton demand by 150,000 bales but exports were revised higher by 500,000 bales to 12 million. As a result, ending stocks are now pegged at 7.3 million bales from 7.7 million projected last month and 10.04 million bales last year. The positive tilt to the US report was offset by news of declining demand from China and increasing world ending stocks which are now pegged at 62.55 million bales from 61.71 million last month. China production was revised down by 700,000 bales and China import demand was revised higher by 500,000 bales to 7 million. China total demand, however, is now pegged at 46.50 million bales from 47.00 last month and from 51.5 million bales last year. Export sales news for the weekly update may have some impact today. Focus is shifting to the shipment pace and traders hope for weekly shipments near last week’s 253,500 bales.

TODAY’S GUIDANCE: December cotton is challenging the November lows and we would have to believe the market should find some fundamental support near the 45.80-42.70 zone.

TODAY’S MARKET IDEAS: Wait for a technical sign of a low before considering buying December futures or bullish option plays. For now, macro economic news may keep the trend down.