THE grain market is working to find its inner self - with the yin of loosening global balance sheets working against the yang of tight regional supplies in parts of Australia and an apparent price stimulated uptick in global export demand.
On a local level, the southern Queensland and northern NSW markets are nervous, as subsequent weather systems fail to deliver on earlier forecasts - with a large early sorghum plant now looking unlikely, as we head past mid November.
But globally, these supportive factors need to be balanced against a corn market that has suffered short term setbacks at the hands of the US EPA reducing its biofuel blending mandates, and China rejecting a cargo of US corn that included a GM variety not yet approved for import.
These two factors have been the key influences that have pushed CME corn futures to fresh three-year lows this week.
As far as the rejected US cargo goes, it is probably one of those stories that has an immediate knee jerk impact.
The cargo in question tested positive for syngenta's agrisure viptera variety - which China is expected to sign off on later this year.
This variety is already approved for trade into markets in Mexico, the EU and Japan.
The EPA ethanol mandate announcement will potentially have a longer-term impact.
It could effectively cut corn used for ethanol production from about 134.6 million MT under the current mandate to between 117 and 122 million MT.
On face value, that is clearly a big hit to demand - but with corn values falling, ethanol producers may well consume more corn than their mandated requirement (as they did in 2011).
Additionally, there will almost certainly be an uptick in both domestic US corn feed useage and exports - based on both absolute value and price relative to wheat.
Corn is finding favour in export markets at current values, with Korean feed millers purchasing 113,000MT of optional origin corn (likely Ukraine) at US$240.80/MT C&F and 136,000MT of US corn at between US$242 and US$244/MT C&F early this week.
This comes on top of South Korean purchases of up to eight cargoes three weeks ago at US$246/MT C&F - indicating that we are now in a relative "sweet spot".
Clearly, these prices are reasonable against wheat - with Egypt purchasing EU wheat last week at US$284.60 FOB, and a recent government tender of Indian wheat attracting bids from US$260-286.20/MT FOB in recent days.
Australian wheat has also been figuring in some of the recent published trade - and based on the offers submitted should win a decent slab of the business from an Iraqi tender over the weekend.
The cheapest Australian offer was for 150,000MT at US$349.29/MT CIFFO, compared to 100,000MT of Canadian at US$345/MT CIFFO.
These two offers were highly competitive against the cheapest US wheat at US$369.44/MT.
In summary - corn is now winning physical business against wheat based on price considerations, and in the short term at least, there appears to be reasonable demand for milling wheat.
Australian wheat in export focused port zones appears well priced.