December corn was 12 cents lower overnight. Crude oil was sharply lower and the dollar was sharply higher overnight.

Corn futures rallied sharply yesterday, but a sharp break overnight in crude and a new 5 1/2 month high in the September US dollar contract reversed nearly all of the gains with the overnight session ending with a late push into new lows. This puts US crop weather decidedly on the sidelines for now as a major price influence, although mild temperatures and relief in some southern areas that previously were dry tend to make weather a mildly negative price factor at this point. Market participants are thought to be evening up ahead of Tuesday's Crop Production and Supply/Demand Reports with trade estimates of yield per acre running below the USDA's trend line yield of 154.9 bushels per acre. A yield of 153 bushels per acre would put 2008/09 ending stocks at a fairly comfortable level of 1.166 billion bushels, and a yield of 156, which would be a bearish surprise, would put ending stocks at a substantial 1.403 billion bushels. Both of these ending stocks numbers assume that the USDA's July usage numbers remain unchanged. A history of the USDA August supply/demand report shows that since 1974, the USDA has increased corn production from July just 14 times. Of the years which they did raise production, the increase averaged 4% with a high of 9% and a low of 1%. A 4% increase this year would come in near 12.183 billion bushels. A 9% increase would be 12.769 billion and a 1% increase would be 11.832 billion. The EPA denied a request by Texas for a 50% cut in the state's ethanol mandate. The EPA indicated that there was a lack of evidence that the mandate would severely harm the US economy, and they added that reducing the mandate would have no impact on ethanol production volumes in the relevant time frames. Traders at the Gulf report that export demand has improved considerably of late, and this was borne out by yesterday's export sales numbers in corn. Net sales were 337,900 tonnes for old crop and 718,400 for new crop for a total of 1,056,300. Old crop sales need to average 184,000 tonnes each week to reach the USDA forecast. Japan was the biggest buyer in old crop with Japan and Mexico the biggest in new crop.

Cooler weather has descended across virtually all major growing areas except the southern Delta, and this is expected to continue. In addition, dry and somewhat stressed areas of the Delta and the Southeastern US are looking for ongoing light to moderate rains on and off through Thursday of next week. No new tenders are scheduled in corn, but traders believe South Korea could tender for near 165,000 tonnes soon.