The corn market was higher on Wednesday as the prospect of lower yields and big demand continue to push the corn market higher. The December contract closed up about 7 cents near the highs of the day as corn opened stronger than expected, set back during the day, but fund buying pushed it back up near the highs in the final hour of trading. It seemed to be a relatively quiet day with corn trading in a tight range of 5-7 cents higher most of the session. With Wednesday being the first day of the month, we expected to see some fund buying as money is pouring into commodity funds. We are beginning to see private estimates of corn yields and production numbers and almost all of them are significantly lower than the USDA estimate back in August. The Linn Group put their FINAL yield at 160.7 which was significantly lower than the USDA 165.0 estimate from August. Traders/analysts were also looking at the US$ because it was significantly lower and that makes US grains cheaper to the world. The corn market seemed to move higher and lower yesterday on spread trading and fund money instead of any change in the fundamentals. The volatility in the corn options was going down as the velocity in futures was reduced. The volume was ok at 248,000 and funds were buyers of about 10,000 contracts.

Overnight, the corn market closed slightly lower on a very quiet night of trading as the trading range was less than 2 cents. The weekly export sales this morning were very strong again this week at over 1.65, mil which was above expectations. The biggest sales were to unknown destinations, so it will be interesting to see who those sales actually got eventually, and if the actual sales happen. We have been watching for sales to So. Korea as they have always been a big buyer of US corn if there isn’t feed wheat available which happened 2 years ago. The outside markets are relatively quiet this morning, so it will see if corn can make another run at the magical $4.50 level that everybody is talking about. It will be significant if the December contract can close up above this level 2 days in a row which just happens to fall on a Friday. The corn market will be called to open slightly higher and then look for direction. A strong wheat market will pull corn with it as we saw yesterday.

Globex Overnight Contract Last Net Change High Low Volume ZCU10 431^0 -1^2 432^4 430^6 4720 ZCZ10 446^0 -0^6 447^2 445^4 12154 ZCH11 458^4 -1^2 460^0 458^4 4400 ZCK11 465^2 -1^0 466^2 464^0 1134

Early Opening Calls: steady, mixed

Cash Markets -- CIF Corn up 1 to 7. Sept. +30Z to +35Z, LH Sept. +40Z to +45Z, Oct. +48 to +50, Nov. +55 to +56, Dec. +56 to +58, Jan. +50 to +53

TREND:

This market continues to be driven by demand side fundamentals. We should get another reminder of this with big export sales again in the morning. We have now added a supply side kicker with confirmation of a lower trend in corn yields. World feed grain stocks are becoming very tight and should force a price reaction that ensures an adequate increase in acres for the next crop year to soften the stocks to use ratio.

Corn has methodically walked higher. If you lost your ownership over the last 10 days, there has only been one small correction to get it back and most of that occurred during the night. This contract has made good trades on the daily chart and the weekly chart. We should see an immediate move to around 4.50 to 4.60 where will could slow down and try to see what has happened to the uncovered user and the farmer seller?

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