Weak basis bids, Mississippi River concerns weigh on corn market

News that China had cancelled sales commitments of 300,000 tonnes of U.S. soybean sales sent the Chicago bean market sharply lower Tuesday morning. As one would expect the grain markets also reacted poorly to the news, especially since they have recently suffered from perceptions of weak export demand as well. Weak basis bids and persistent concerns about low Mississippi River levels also seemed to weigh on the corn market. Improved South American weather, which bodes well for their forthcoming crops, may also be weighing upon U.S. prices. March corn had fallen 5 1/4 cents to $7.18 3/4 by late morning, whereas the December 2013 contract slipped just one cent to $6.21/bushel.

China reportedly cancelled prior purchases of 300,000 tonnes of U.S. soybeans overnight, as did the buyer of 120,000 tonnes previously headed to an unknown destination. That news more than offset a report of a fresh 110,000-tonne sale to another unknown buyer. This news probably caught the market off guard, since prices had recently been rising. We wonder if they have decided they now own enough beans to meet their short-term needs and will start looking to South America for their mid-2013 requirements. Given their position as a huge player in the soybean and product markets, speculation about their likely activities could greatly influence the Chicago market for the foreseeable future. January beans dove 19 1/4 cents to $14.69 per bushel in Tuesday morning trading, while January oil was down 0.58 to 49.21 cents/pound and January meal had fallen $7.4 to $447.5/ton.

The wheat market also fell substantially in reaction to early morning news that China had cancelled 300,000 tonnes of U.S. soybean purchases. Indeed, given the fact that wheat futures had fallen in six of the last seven trading sessions, one could easily argue that it might set to move sharply lower, especially if the March CBOT contract fell below the psychologically important $8.00/bushel level. However, after testing technical support in that area, the markets turned decisively higher, thereby suggesting prices have fallen enough lately to attract renewed buying interest. We are not sure wheat futures are being affected by the storm sweeping into the Central Plains, since the weather maps look as if most of the anticipated snow will fall northeast of most winter wheat areas. March CBOT wheat had rebounded 5 1/4 cents to $8.08/bushel by late morning; March KCBT wheat rose 4 1/4 cents to $8.60 1/2 and March MGE futures bounced 7 3/4 to $9.04 per bushel.

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