The USDA data release brought us news that the corn balance sheet was reduced by 50 million bushels from 2.487 down to 2.437 on a 50 million bushel jump in corn used for ethanol. South American corn production and exports were left unchanged. The Chinese and EU corn crops were raised slightly higher. Global corn supply was raised slightly higher as corn prices posted new contract lows ahead of today's USDA report but rebounded post report.
As I've been saying for several weeks, I still believe we could see lower highs and lower lows nearby. South American weather forecasts are showing a little more moisture, in turn, the bulls are backpedaling a bit. On the demand side of the equation, corn used for ethanol remains record strong, while feed and export demand remains steady.
Mexico was again in the market for U.S. corn and continues to be a healthy buyer ahead of possible fallout associated with NAFTA negotiations. I still keep hearing there's a very real possibility the U.S. could pull out of the deal altogether. Most insiders believe that type of scenario would have a much larger impact on the livestock markets than corn. Yes, I have to imagine corn would still see a knee-jerk to the downside if Washington were to announce they were officially pulling out of NAFTA.
Word in the market is a potential 10-20-cent down-stroke almost immediately should negative news hit the headlines regarding NAFTA. It's thought that an initial soybean price setback would be more severe should the U.S. pulls out of NAFTA. This is certainly something we are keeping our eyes on.
As a producer, I'm staying patient. Many producers I know are looking to take advantage of their improved local basis, low volatility and cheap price on the board, opting to sell the cash bushels and re-own with some type of cheap long call strategy. This makes sense and might be worth considering if you are in an area that has seen strong basis appreciation.
As a spec, I still think there is more nearby room to the downside, but like the thought of starting to build a longer-term bullish position. Just starting to nibble a bit on the breaks...