Morning 10 day SA precip – ARG and southern BRA still see a forecast for rainfall improvements from days 7 to further out.

Ethanol moderate, exports expected moderate/poor, some end of week selling possible

Ethanol will be expected strong again on today’s report, likely close to last week’s 1102K 

Friday’s USDA report cut carryout by 198 mil bu, that new level of 1.540 now raises the fair valuelevel to a minimum of 520, the last time corn posted a carryout of 1.500 old crop was trading at $6

The new carryout numbers if seen as estimated would hint at fair values of 485 and 1050. We expecttrade to continue operating at a discount to fair value but a lower carryout would still be supportive.

The ARG forecast still has some light rains that were added yesterday, southern BRA rains are a bit heavier but likely not reaching normal levels just yet

Overnight trade saw a new round of panic selling in beans which spilled some pressure to corn

Looking back over 30 years of USDA reports we also note that when yield is lowered in November(as it was this year) it is very often lowered again, at least slightly, on the January crop report

The Jan crop report is a week from today and even if carryout is left unchanged the 1.738 would stillbe slightly supportive, there is even a chance USDA may slightly raise demand again next week

The recent bounce in corn/beans was on solid to strong volume, giving more confidence in the move

ARG 10 day maps are still on the drier side which is still causing bean support and spilling some ofthat support over to the corn market

Beans are offering spill over support overnight, the opposite of what we’ve seen the last 5 weeks

Morning ARG maps increased rain just slightly, rains still hold off to day 6 but what might cause light pressure is seeing the maps are not flip flopping, they are sticking with a moderate rain event days 6 – 9

These maps are still not concerning for actual production losses but with March priced 54 centsunder fair value there are many traders already pre pricing in a very strong or record crop

Corn attempted to shrug off the bean setback until beans fell more than 20 cents which then corn had to follow, if beans continue to ease spillover pressure on corn, corn can bounce on its own news

After last week’s slowdown in exports to 947K estimates for this week have eased slightly from strong expectations in previous weeks to now more moderate expectations

This is also the seasonal strongest week for basis, another factor which suggests not storing

During strong production years (like this year) this week is seasonally the strongest week for basis which may also attract some producer selling

Exports were disappointing yesterday at 947K, on a fundamental basis one poor week is not a major,event but we know traders have been cautious of an export slow down so some easing is expected

Just as we have seen the previous 5 weeks, traders are leaving price at a level that assumes poorexports of 1000K or lower

Some major questions trade is likely to have: Can the export new export goal be reached? While notas difficult, can the new ethanol goal be reached? 2 questions which may limit a move towards 470

Going into this report corn is priced at a level that assumes a small carryout decline which is expectedtoday. Beans are still trading a carryout number a fair amount higher than 0.469 and wheat is inbetween those two priced slightly low but not as drastic as beans.

The pre report buying is likely to remain small as the expected carryout change is only likely to movefair value from 440 up to around 445

We may see some light pre buying of Tuesday’s report but most traders are still avoiding anything aggressively long for fear of what may happen to exports after Jan 20th