DTN Early Word Grains
Trade Tensions Ease, Commodities Respond Higher
March corn was up 4 1/4 cents, January soybeans were up 17 1/2 cents and March Kansas City wheat was up 5 cents.
CME Globex Recap:The entire soybean complex is trading higher early Monday after the White House issued a statement late Saturday, explaining the U.S. will not increase tariffs on Chinese goods as of January 1 and China will buy a substantial amount of U.S. products. Specifics were not yet provided and more negotiation is required, but investors responded favorably, sending Dow Jones futures, gold and crude oil higher, as well as grain prices.
OUTSIDE MARKETS:Previous closes on Friday showed the Dow Jones Industrial Average up 199.62 points at 25,538.46 and the S&P 500 up 22.41 points at 2,760.17 while the 10-year Treasury yield ended at 3.01%. Early Monday, DJIA futures are up 461 points. Asian markets were higher with Japan's Nikkei 225 up 223.70 points (1.0%) and China's Shanghai Composite up 66.61 points (2.6%). European markets are also higher with London's FTSE 100 up 162.75 points (2.3%), Germany's DAX up 296.16 points (2.6%), and France's CAC 40 up 98.70 points (2.0%). The euro was up 0.0035 at 1.1357 and the U.S. dollar index was down 0.22 at 96.98. December 30-year T-Bonds were down 6/32nds while February gold was up $10.00 at $1236.00 and January crude oil was up $2.18 at $53.11. Soybeans and meal on China's Dalian Exchange were both a little lower. Malaysian palm oil was down 2.0%.
| BULL | BEAR | ||
| 1) | Saturday night's announcement from the White House infused hope that the U.S. and China are making progress on trade differences, but more negotiating is still needed. | 1) | Without trade improvement, U.S. ending soybean stocks and ending wheat stocks could both come in above one billion bushels in 2018-19. |
| 2) | After two sessions, delivery intentions for December corn are light at just four and there have been none yet for Chicago wheat. | 2) | The crush margin for U.S. soybeans still looks profitable, but is much lower than this year's earlier levels, based on January futures. |
| 3) | Russia's renewed aggression against Ukrainian ships in the Azov Sea remains a concern in the region. | 3) | So far, the seven-day forecasts have been favorable for crop conditions in Brazil and Argentina. |
CORN March corn is trading up 4 1/4 cents early Monday, receiving bullish influence from soybeans and Saturday's favorable news that trade tensions between China and the U.S. have eased, at least temporarily. Corn trade is not directly affected by the trade dispute, but would indirectly benefit from better soybean movement in the U.S. and growers getting higher soybean prices. Over the weekend, winter storms across the central and eastern Midwest likely caught some producers with unfinished harvest, but USDA's Crop Progress reports have stopped for the year so the next meaningful harvest update will come from the January 11 WASDE report. Two more delivery intentions were issued for December corn Friday evening, bringing the early total to just four.
SOYBEANS January soybeans are trading up 17 1/2 cents early, not as high as the 29-cent gain in the first moments of trading, but still a decent gain to start Monday's session. As explained above, the U.S. agreed not to raise tariffs on Chinese goods on January 1 and the White House says China has agreed to buy a substantial amount of U.S. goods, although specifics were not released. Overall, the tone of Saturday's announcement sounded hopeful that the two sides are getting closer, but at the risk of being a party pooper, we need to point out that the market will eventually need to hear more details if higher soybean prices are to be sustained. More precipitation in this weekend's weather did not help soybean harvest efforts and it is possible we will see a lower soybean crop estimate from USDA on January 11. The CME reported 82 delivery intentions for December soybean meal and 1,183 for December soybean oil Friday evening.
WHEAT March K.C. wheat is up a nickel early Monday and similar to corn, is benefitting from the positive tone of Saturday's trade news, even though China is not a significant buyer of U.S. wheat. After seeing no delivery intentions for winter wheat on Thursday evening, Friday evening followed with 400 delivery intentions for December K.C. wheat, but none yet for Chicago wheat. The lack of recent deliveries remains a possible clue of increased demand for U.S. wheat and is also supported by how Dec/Mar futures spreads are showing increased buying interest for the near months in Chicago and Minneapolis wheat, in particular. We do not yet see however, much tangible evidence of increased demand in wheat's export data and that remains a bearish concern. According to AP, Ukraine's president said Russia has deployed more than 80,000 troops near the Ukrainian border with various weapons and remains a threat in the region. For now, cash HRW wheat prices are in a downtrend, but higher closes on Monday have a chance to put cash SRW and HRS wheat prices at new three-month highs.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.38 | $0.06 | -$0.39 | Mar | $0.016 |
| Soybeans: | $8.07 | $0.08 | -$0.87 | Jan | $0.001 |
| SRW Wheat: | $4.86 | $0.17 | -$0.30 | Mar | $0.093 |
| HRW Wheat: | $4.62 | $0.16 | -$0.38 | Mar | $0.081 |
| HRS Wheat: | $5.43 | $0.09 | -$0.33 | Mar | $0.012 |
Todd Hultman can be reached at todd.hultman@dtn.com
Toddcan be followed throughout the day on Twitter @ToddHultman1
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