The corn market closed slightly lower on Tuesday as the rest of the grain complex sold off and pulled corn lower. The corn market opened better than expected and never got near the lows of the session that traded during the night session. The corn market traded on both sides of unchanged most of the day until it traded near the highs of the session before falling to the spillover pressure from wheat and beans. Tuesday was the last day of the month and the market was probably seeing general commodity selling pressure as funds were repositioning themselves for the new month and new money coming into and out of the funds. The corn market is still hesitant to extend gains until traders/analysts get a better idea of yields, but we are seeing good support on breaks. On Monday night, corn traded almost 10 cents lower, but it didn’t stay there long and never was able to set back more than 4-5 cents during the regular session. The end user keeps protecting his needs in corn, but we don’t see a lot of follow through when corn takes out the previous highs. Right now, traders/analysts are nervous about taking significant positions until farmers start harvesting in the heart of the Midwest. The weather remains a non-factor for corn yields, but it will delay harvest in some parts as a front goes through the Midwest. The volume yesterday was pretty good at 319,000 contracts and funds were sellers of about 8,000 contracts on the day.

Overnight, the corn market started lower, but moved higher as the US$ started going lower helping grain prices. The corn market closed up about 6 cents right on the highs of the session. The corn market opened lower because it was actually trading lower than the settlement price because of the crazy way the CBOT figures the settlement, but it didn’t stay lower very long. Traders said the strength in corn last night was fund buying on the weakness from the sell off yesterday, a stronger wheat market, and the weaker US$. While the grains have largely ignored the outside markets, crude down $3 yesterday for example, the much weaker US$ will have a much more material affect on grain prices. The key for the increase in demand for corn will be exports, not domestic demand, so a weaker US$ makes US grains cheaper to the rest of the world. Technically, the corn market is looking to trade about $4.50 which was the high back in January before the sell off after the January crop report. Today will be an interesting day if corn can get up to and above the $4.50 level and it can hold. I would think we would see some profit taking at that level, but don’t underestimate the funds and the beginning of the month. There is no doubt that you trade the corn from the long side buying breaks and selling sharp rallies. Corn will be called 4-6 higher, but watch the US$ for more indication.

Globex Overnight Contract Last Net Change High Low Volume ZCU10 431^2 6^6 431^2 423^2 3129 ZCZ10 445^4 6^2 446^0 437^6 16806 ZCH11 458^2 6^0 459^0 451^0 3894 ZCK11 465^0 6^2 465^0 457^6 954

Early Opening Calls: 4-6 cents better

Top News -- A total of 165,000 mt of US no. 3 or better Corn is being snap tendered on Wednesday by Nonghyup of S Korea. The grain is for delivery in Jan '11 -- Head of Algeria's farmers group says the country's barley crop could drop by as mush as 50% this year compared to last year. But says domestic Durum wheat crop was good and would likely lower this year's import needs -- Ukraine press citing gov't ag officials suggested the country will plant 6.4 mln ha of Winter Wheat this fall. Winter Barley would take up 1.2 mln ha of land while rye plantings are seen at 300,000 ha -- Argentine Ag Minister sounded optimistic regarding the upcoming Corn crop estimating the next crop at 26 mln mt, which would be an all time record production figure for that country -- Sen. Grassley of Iowa told reporters at Indiana farm trade show that the EPA will likely approve increasing the Ethanol blend to 15% in gasoline but the approval will also probably come with convoluted rules. -- USDA increased its fiscal year 2011 farm export expectations to $113 billion, up $8.5 billion over the current fiscal year expectations -- USDA report suggests in the next fiscal year China will buy $15 billion worth of US farm exports, that would be $1 billion more than the 2010 fiscal year projection. The 2011 projections would make China 2nd largest farm import, leapfrogging Mexico's $14.5 billion. -- Imports by US farms in the fiscal year 2011 are expected at $81.5 billion, that would be a jump of $4.5 billion from the expected 2010 fiscal year imports, acc. to USDA report -- As Russia's Ag Minister repeated the 60-65 mln mt grain harvest estimate, she also said the country would not need grain imports this year, despite private analysts estimating imports ranging from 3 to 6 mln mt -- Traders note FC Stone production survey out this afternoon, some expect them to lower their estimates -- Pending Tender: Traders say Libya is looking to tender for 30,000 mt of Corn in a Thursday, Sept 2 bid deadline -- Pending Tender: Traders say in the week of Aug 30 to Sep 3 they expect S Korea's MFG to issue a tender for 40-60,000 mt of Corn. Shipment of the grain is reportedly for the Nov-Dec period -- Pending Tender: Japan announced it is looking to purchase 20,000 mt of food grade Barley in a SBS tender to close on Sept 3rd. The cargos must be shipped by Nov 30th -- Pending Tender: Merchandisers in the EU say Jordan's state run grain buyer is seeking 50,000 mt of feed grade Barely in an August 24 tender deadline. Delivery is for FH Sep or FH Oct -- Dalian May Corn futures were up +4 @ 2,023 yuan/mt. -- Liffe Nov. Corn futures were down -.50 @ 196.00 euros/mt. -- Globex Corn Vol: 281,342; Pit Vol: 31,250; Open Interest change: - 7,564 -- Weather: 6-10 Day Forecast: Above Normal Temps. Normal to Above Precip. -- Outside markets: Energy Complex +0.94 at $72.86; Gold & Silver: +5.7 at $1256.0 & +0.028 at $19.460; US $ -0.844 at $82.750

Cash Markets -- CIF Corn steady up 1. Aug. +?? to +39, Sept. +37 to +42, LH Sept. +51 to +??, Oct. +47 to +50, Nov. +54 to +56, Dec. +55 to +58, Jan. +49 to +52

TREND:

We talked yesterday about the resiliency of the corn market, as the trade has left the closes for 3 consecutive sessions. For much of the day today we saw the same type of price action…that is until the close when funds came in and sold 5,000 contracts. Had price targets to buy Dec corn at 4.35, and we did get there in the overnight session, but was never given the chance to buy it during the day. Still look to buy dips as the long term outlook remains constructive.

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