The wheat crop in the Black Sea region appears to be in much better condition than previously thought and this has pressured wheat feed values lower, making it much more competitive with US corn. Also, there continues to be plenty of uncertainty about the Greek debt crisis and what it means for the Euro area. Crude oil prices have also retreated and in recent years crude and corn prices have correlated very well, bound by the increase in ethanol use. All this is welcome news for US livestock producers although some of the macro factors impacting corn are also negative for meat protein demand. And despite the recent pullback in corn futures, we are still looking at $6 corn well into 2012.

The supply outlook will clearly drive markets in the next couple of months. The most recent USDA crop progress report had 68 per cent in good/excellent condition, compared to 75 per cent a year ago and 69.6 per cent average for the past five years. The corn crop in Iowa remains in great shape, with 80 per cent of the crop rated good/excellent. Indiana and Ohio, on the other hand, continue to lag behind year ago levels. Crop conditions in Indiana were rated 57 per cent good/ex compared to 65 per cent a year ago while Ohio rated 52 per cent good/ex compared to 62 per cent a year ago. Also important to note is the crop situation in Texas and other southern states. Latest report noted just 22 per cent of Texas crop was in good/excellent condition while 51 per cent was in poor/very poor condition.

Last year 73 per cent of the Texas crop was rated good/ex. While the market at the moment may be trying to price the risk of slower growth in the US and weaker global demand, corn supplies remain tight and above average yields will be needed to maintain the status quo, let alone rebuild stocks.

On Thursday USDA will release the results of its annual Acreage survey. A Dow Jones survey of analysts shows expectations are for 90.776 million acres of corn planted, compared to 92.178 million in the March survey but about the same as the USDA June report. Market remain cautious about a bearish surprise in the report, which could send futures plummeting further. High out front corn futures and speculation that we could run out of corn this year likely induced farmers to continue to plant acres, especially in the Eastern Corn Belt. Some reports also have noted that flooding damage may have not been as large as feared. Also on Thursday, USDA will publish its quarterly Grain stocks report. In March, the stocks report showed larger than expected drawdown of corn supplies and marked the start of a bull run in corn futures. On average trade expecting corn stocks as of 1 June at 3.302 billion bushels. Last year, Jun - Aug corn use was 2.602 billion bushels and five year average has been 2.444 billion bu.