DTN Before The Bell Grains

Morning CME Globex Update:

Corn kept inside a typically narrow trading range overnight, while soybeans expressed bearish doubt about the upcoming G-20 Summit and the hint at trade negotiations that may or may not occur there. Only wheat futures were noticeably higher Monday morning due to an escalation of the tensions between Russia and Ukraine.

Other Markets:

Dow Jones:	Higher
U.S. Dollar Index:	Lower
Gold:	Higher
Crude Oil:	Higher

Corn:

Corn futures are lightly lower Monday morning after spending another night inside a very small, 2-cent trading range. If it continues in this lower direction, this will be the sixth straight session that the corn futures market has posted a series of gradually lower daily highs, and the December contract is now 20 cents off its high from the day of the November crop report. The recent downward trend in crude oil has been much more severe, with a barrel of WTI now worth $25.80 less than it was on October 3, a 33 percent discount. January crude oil traded as low as $50.10 overnight, but energy futures are bouncing higher as the morning wears on, which could support neutral trade in corn. The DTN National Corn Index was $3.28 per bushel Friday, showing national average basis steady at 31 cents under the nearby futures contract.

Soybeans:

There's a strong likelihood that soybean futures will burst in one direction or another this Friday, or in reaction to comments made Friday by the U.S. and Chinese presidents at the G-20 Summit in Argentina, but until then, the January chart continues to flop somewhere within 20 cents of the $8.80 level. The day-to-day direction of that flop depends on the prevailing guesses and moods of the market, apparently bearish on Monday morning. The bearishness is exacerbated by favorable planting progress and beneficial weather in Brazil, as well as friendly negotiations between Argentina and China about trading processed soybean meal. Back in the U.S., soybean basis bids have continued their post-harvest tightening during the past week, with the nationwide average now seen at 89 cents under the January futures contract, putting the DTN National Soybean Index at $7.92 per bushel Friday.

Wheat:

Wheat futures are following up on Friday's bounce with more gains Monday morning, and it's the benchmark front-month Chicago wheat contract that is leading the upward charge. However, open interest in December Chicago wheat futures has dwindled to a quarter of the contracts held at the start of this month, and speculative 'Managed Money' traders are still net-short in Chicago wheat, so we can't attach too much bullish significance to this movement. Looking at the longer-term supply-and-demand outlook, the May-to-July futures spread is still as bearish as ever. Watch for a spurt of hedge trading volume in KC and Minneapolis contracts this week when Iraq is expected to tender for milling wheat. The cost of shipping wheat from the Black Sea region will likely increase while ongoing tensions between Russia and Ukraine create challenges for vessels, and that argument allows European and U.S. wheat prices to rise. DTN's collected SRW Index on Friday was $4.68 per bushel (32 cents under the December Chicago futures contract); the HRW Index was $4.31 (30 cents under the December KC futures contract); and the Spring Wheat Index was $5.34 per bushel (41 cents under the December Minneapolis futures contract). At 8 a.m. USDA reported 120,000 mt SRW sold to Egypt for delivery in 2018-2019.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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