The corn market was lower on Thursday as we continued to see speculative selling and fund liquidation. The March and December contracts closed down about 3 cents which was off the lows as we continued to see fund buying come into the corn market at the end of the session that pushed corn higher. Traders/analysts also pointed to the weaker than expected export sales that shows that demand is still anemic and with burdensome supplies, it points to lower corn prices. The early weakness in corn and beans was supported, probably more by the expected fund buying at the end of the day than traders feeling that corn has found value. Technically, corn has done a lot of damage this week and this should signify a top in the corn market unless we have a major fundamental change. The bulls are pointing to a battle for acres this spring, but with the likely increase in corn acres this year because of lower wheat acres, this may not happen to a big extent. With the warmer weather across most of the Midwest, traders/analysts are expecting to see some harvest progress this weekend. There were rumors out of Goldman Sachs yesterday during the session that they were telling clients to liquidate long corn positions which also weighed on the markets. The volume was good at 248,000 contracts and funds were sellers of about 10,000 contracts.

Overnight, corn was lower again with the March and December closing down about 2-3 cents on a tight trading range of only 3-4 cents. The corn market remains under pressure because of the USDA report on Tuesday, but it isn’t finding aggressive selling because of the expected fund rebalancing and buying that is supposed to end today. The number of contracts was smaller yesterday as compared to earlier in the week and it is expected to be even smaller today, the last day. The USDA this morning announced sales of 112 mt to unknown destinations and we will probably see the export sales pick up with the lower prices. The USDA also announced that So. Korea bot 8-9 cargoes of US corn yesterday afternoon for delivery in March-May. Corn is on track to have the worst weekly performance and some traders/analysts feel that corn has to go lower to try and convince farmers they need to plant beans instead of corn. The corn market will be called lower this morning and there isn’t really any positive news that should push corn higher unless we see some profit taking after the big sell off this week. After the big drop this week, it will be interesting to see if they can push corn into new lows. Today is the last day of fund rebalancing for corn only, so we might see the support like we have seen the last 5 days in the grains.

Globex Overnight Contract Last Net Change High Low Volume ZCH10 378^6 -2^2 379^6 376^4 8316 ZCK10 389^6 -2^0 390^4 387^4 1489 ZCN10 399^2 -1^6 399^4 397^0 1549 ZCU10 405^2 -3^0 407^0 405^0 167

Early Opening Calls: off 2-3 cents

-- The Census Bureau reported November biodiesel production at 66 million gallons, 22% higher than Oct, but 7% less than Nov 2008; soy oil biodiesel accounted for 47% of total Nov production -- Sugar trade groups in Brazil lent their support to the government decision to lower anhydrous ethanol blend rates from 25% to 20%, after the government attached a 3 month timetable to the measure. The sugarcane situation remains very tight in Brazil; the reduction in blending will reduce ethanol use by about 1 mil gal/day & E-95 use should also decline as consumer ethanol prices in Brazil soar. -- California's state law office approved the Air Resource Board's Low-Carbon Fuels Standard, which applies specific greenhouse gas measurements to different types of fuel, including region-specific ethanol. Ethanol groups have protested the measure, filing a series of lawsuits and petitions, as the CARB legislation severely penalizes transportation of fuels; analysts believe it could potentially eliminate Midwest ethanol from being blended into the state's motor fuel supply -- Top executive at Mosaic, says some fertilizer market participants are looking to buy product in spot market deals instead of longer term contracts -- Bunge discusses with Vale sale of Bunge's stake in Brazilian fertilizer firm Fosfertil -- Pending Tender: Niger to receive 4,550 mt of US Sorghum via CCC tender scheduled to close on Jan 19th -- Pending Tender: Jan 12 bid deadline set for Taiwan feed industry group's 40-60,000 mt Corn tender. Traders say they're seeking corn from Brazil or the US with shipment during March -- Pending Tender: 100,000 mt of Barley is being sought in a Jan 20th tender floated by Jordan's state run grain buyer with delivery expected in the Mar/Apr period -- Pending Tender: 100,000 mt any origin feed grade Barley tender was floated on Thursday by Jordan's state run grain buyer, bids are due by Jan 20 and shipment is for LH Mar/FH Apr -- Dalian corn futures were mixed, nearby contracts were -3 to +3, while the benchmark Sep contract backed off -4 yuan to 1,893 yuan/mt -- Liffe March corn futures were off -1.25 euro at 136.5 euros/mt. -- Globex Corn Vol: 206,498; Pit Vol.: 30,077; Open Interest change: + 1,885 -- Weather: 10 Day Forecast: Above Normal Temps. Above Normal Precip. -- Outside markets: Energy Complex -0.61 at $78.78; Gold & Silver: -9.5 at $1133.5 & -0.090 at $18.565; US $ +0.485 at $77.370

Cash Markets -- CIF Corn steady up 2. Jan. +43 to +44, Feb. +45 to +46 , Mar. +46 to +48, April +39 to +40, May +39 to +40, June +39 to +40, July +39 to +40, Oct. +39 to +42

TREND:

The trade is starting to believe the market will not be able to bounce much. And there appears to some farmers stuck with cash corn and the trading funds remain long 140 thou corn contracts and over 35 thou bean contracts. Look for some serious soul searching to take place as this market closes near the lows for the week if not making new ones. If we close as weak as expected on Fri of this week, it sets up a big bad bear trade for next week.

Corn continues the market with the largest exposure so has the biggest risk to the down side.

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