May corn was 3 cents higher late in the overnight session. The dollar index was mixed to lower and equities were higher.

Today is a USDA report day and traders indicate that this is causing evening up in the form of short covering. A more positive tone in outside markets is also providing support along with ideas that the USDA will slightly lower US ending stocks in corn today.

All of this follows the January USDA reports which found more than 200 million additional bushels of corn and pushed this added supply through to higher ending stocks for 2009/10. As a result, the corn market has been in significant downtrend from the release day of the January reports up to the end of last week. Open interest has increased moderately along with the downtrend, although it began to stabilize near recent highs starting late last week.

Traders are expecting the USDA to trim ending stocks for corn by nearly 20 million bushels today versus January's total of 1.764 billion bushels. Traders may also start keeping a closer eye on ethanol usage due to the strong pace of production through November and recent decisions by the EPA which seem to provide a green light for increased use of corn to produce ethanol. November is the latest month for which official ethanol production data are available. Production as of that month was already running at an annualized rate of 11.9 billion gallons versus the US mandate for 2010 at 12 billion gallons. Since production is on a steady long term up trend, this suggests that the US will easily reach the 12 billion gallon level this year and possibly exceed it. That in turn suggests that corn usage for ethanol should meet or exceed the current USDA projection of 4.2 billion bushels, although we may not see this reflected on today's supply/demand report.

This week's export inspections for corn were sluggish at just 27.102 million bushels which was down substantially from last week's total of 39.447 million. Total inspections to-date stand at just 33.8% of the USDA's projected exports for 2009/10 versus a 5-year average of 41.8%. Inspections need to average 45.431 million bushels each week to reach the USDA's projection.