December corn was 23 cents lower overnight. Crude oil was sharply lower to trade at below $90 and the dollar was sharply higher.

A modest recovery rally on Friday in the December corn contract was followed by a close near the lows for the week. The December contract then gapped lower in the overnight session to start the current week amid fears that the economic slowdown will develop into a general deflationary cycle. Rapid harvest progress in the latest week and through the weekend in the US has also raised fears of heavy selling by farmers as crops come in from the fields. In addition, private forecasters last week suggested that yield may be as high or higher than the latest USDA estimate. However, weather forecasts for this week are somewhat wetter than previously forecast, and this may cause temporary harvest delays starting today in the western corn belt and Wednesday in the central and eastern corn belt. The Commitments of Traders Report for the week ending September 30th showed that funds were very large-scale net sellers. Trend-following funds were net sellers of a whopping 22,014 contracts while index funds were net sellers of 12,089 for a combined total of over 34,000 contracts sold by funds on a net basis. This takes the net long position of the trend-followers down to just under 41,000 contracts, compared to over 250,000 contracts earlier this year. The last time these funds were net short in corn was during very early 2006. Index funds still hold a net long position of nearly 306,000 contracts and the move under $90.00 in crude could spark increased redemptions from index funds and more selling in corn. The 6-day farm strike that started on Friday in Argentina was disruptive to selling by farmers at the end of the week.

Weather should be warmer in most harvest areas this week as expected, but it may also be wetter. A north/south system of rain is expected in western growing areas tomorrow, hitting Missouri, Iowa and Minnesota in particular, and this is expected to move as far east as Indiana and eastern Ohio by Wednesday. Traders overseas say that private companies in Israel are tendering for up to 24,000 tonnes of corn along with 42,000 tonnes of meal and corn products.