Futures Demand Exceeds Corn Demand In CBOT Rally

“The real negative point of this is that nearly all corn sold was to fill out soymeal cargos,” said MaxYield commodity trade adviser Karl Setzer. “Nobody really wanted our corn, but took it anyway.”

Traders and analysts differ on the significance of the weak sales, whether they have been caused by higher prices and to what extent the poor sales would weigh on the market.

The market surged to five-month highs this week, and on Thursday the nearby contracts closed above $4 for the first time since June. For some, the weak export sales barely merit consideration as the market rallies on a weaker dollar, fund-buying and perpetually lousy harvest weather forecasts.

“We’re here for reasons other than demand,” a floor trader said.

But others say the weak sales are a sign that importers are going to pass on prices at this level and can’t be ignored. Jason Britt, president of Central State Commodities, said this week’s sales total was “horrible” and could give some traders pause.

“You have to say ‘wait a second, we still have to sell $4 corn,’” Britt said.

The weak sales indicate end-users are unwilling to chase prices sharply higher given current fundamental factors, said Shawn McCambridge, senior grains analyst with Prudential Bache. A floor trader said it “seems like there’s more demand for futures than there is demand for the physical commodity.”

Longer-term, demand is the bigger unknown for the market, said Joel Karlin, analyst for Western Milling. He and others say that regardless of the adverse harvest weather, this year’s crop will end up somewhere around 13 billion bushels. But it’s unclear if there will be 13 billion bushels of demand, Karlin said, particularly given the “USDA’s tendency to overstate demand.”

“Supply is known,” Karlin said. “Demand is a little questionable at this point.”

The recently weak export sales aren’t wholly caused by higher prices, some analysts said. Terry Reilly, analyst for Citigroup, said that exports are being limited because of the lack of availability of corn at the Gulf or other ports. The slow harvest has meant little corn in the pipeline.

As the harvest picks up and more corn becomes available, end-users will start to buy more, and prices will drop, some analysts said. McCambridge said until the harvest picks up, it is too soon to worry.

“If it continues into the middle of November and we don’t see a rebound in those numbers to a million-plus on a weekly basis, then yes, it becomes a greater concern,” McCambridge said.

Source: CME Group