MARKET REVIEW: Monday, January 31, 2011

1/31 Weekly Corn Export Inspections:  18.690 million bushels versus 24-32 million bushels expected - last week revised higher by 673K bushels      

1/27 Weekly Corn Export Sales: 414.7KT old crop, 132.8KT new crop vs. 500K - 900KT expected

Old crop corn closes 15 ½ cents higher, new crop corn closes 14 ¾ cents higher.

Strong demand for ethanol usage more than offset the weak export demand.  A lower U.S. Dollar coupled with strong energy prices buoys futures as does the idea of new money coming into the corn market.  Corn Futures have been in a consolidation trend since January 13^th yet open interest has increased by over 50K contracts since then.  New crop corn almost stayed in step with the old crop as the need for new crop acres is not going to go away given the tight carry-in from the old crop.  Unless we get 91.0-92.0M acres and a good growing season the balance sheets for corn will look extremely tight once again.  We are being told that there has been a slight up-tick in U.S. corn export interest and we believe a good portion of this is coming from the labor problems being experienced in Argentina.

Basis levels for U.S. corn are relatively firm in the interior as well as for export.  We think a good portion of this is from higher freight and just slow movement.  Unless we see new highs we are not going to see new amounts of corn move and even then that is no guarantee.  The U.S. farmer seems pretty bullish right now.  Futures' spreads saw a slight up-tick within old crop and slight easing in the old crop new crop spreads.  The July/Dec spread has been spinning its wheels since shortly after the January 12^th crop report.

The technical read on the futures price is consolidation at its recent upper end.  I have to think that the longer the price consolidates at this level the greater the chance at following through to the upside.  Our rational is that the sideways trade over time negates overbought conditions.  Experience also tells us that tops usually don't take this long to develop as the price is accepting this level versus rejecting it.  Just when the market breaks out of this consolidation pattern remains to be seen.  We will offer this is the highest close March corn has seen since the price was elevated to this level.  March corn closed at $6.59 ½ on January 18^th and again on Monday.  If you believe that new money is coming in you believe that the future price is in line to challenge its high at $6.67 on Tuesday.  New crop corn gave us its best close to date on Monday and the flat price is only 1 ¾ cents away from its previous high registered last Thursday.  December corn's outside day with the strong close suggests $6.00-$6.05 will occur sooner versus later.   We are inclined to believe that we saw evidence of new money on Monday as evidenced by the big paper flow into the pit on the close goosing the closing prices.                          

Daily Support & Resistance

March Corn: $6.51 - $6.67 (?)    

July Corn: $6.66 - $6.81 (?)

Dec Corn: $5.83 ½ - $6.01      

(Source: http://www.insidefutures.com/article/213805/MARKET%20REVIEW.html)