DTN Early Word Grains

Grains Try Higher Early Start

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Pre-6:00 a.m. CME Globex:

March corn is up 2 1/4 cents, March soybeans are up 4 1/4 cents, and March K.C. wheat is up 3 1/2 cents.

CME Globex Recap:

Currency markets are roughly steady, including the U.S. dollar after the U.K.'s Brexit proposal failed and Prime Minister May now faces a vote of confidence. European stock markets are mixed and the Dow Jones futures are a little higher early with most of the commodity board returning to green early Wednesday.

OUTSIDE MARKETS:

Previous closes on Tuesday showed the Dow Jones Industrial Average up 155.75 at 24,065.59 and the S&P 500 up 27.69 at 2,610.30 while the 10-yr Treasury yield ended at 2.71%. Early Wednesday, DJIA futures are up 32 points. Asian markets are mostly lower with Japan's Nikkei 225 down 112.54 (-0.5%) and China's Shanghai Composite up 0.08 points (0.3%). European markets are higher with London's FTSE 100 down 33.17 points (-0.5%), Germany's DAX down 8.60 points (-0.08%), and France's CAC 40 up 9.34 points (0.2%). The March euro was steady at 1.146 and the March U.S. dollar index was down 0.01 at 95.66. March 30-year T-Bonds were down 20/32nds while February gold was up $0.70 at $1289.10 and February crude oil was down $0.16 at $51.95. Soybeans on China's Dalian Exchange were down 1% while soymeal was down 1.0%.

BULL BEAR
1) It is more difficult to find bullish factors after Tuesday's sell-off, but the seven-day forecast is still mostly hot and dry for south-central Brazil, still stressful to crop conditions. 1) According to Dow Jones, U.S. Senator Grassley said Trade Representative Robert Lighthizer reported "little progress in talks with China on structural issues."
2) Heavy rains in northern Argentina have produced serious flooding in some crop areas. 2) Chances for light rains were added to this week's forecast for south-central Brazil -- not enough to necessarily rescue dry crops, but enough to give bullish traders pause.
3) Trade representatives from the U.S. and China are set to meet again on Jan. 30. 3) Ongoing concerns about a slowing world economy and negative impact from the ongoing government shutdown are giving investors reason to be cautious.

MORE COMMODITY-SPECIFIC COMMENTS

CORN March corn is up 2 1/4 cents Wednesday, getting an early bounce after Tuesday's unexpected 7 1/4 cent drop. Part of Tuesday's selling was likely related to chances for light rain in south-central Brazil, but the expected amounts are not enough by themselves to significantly change crop conditions while the overall forecast still remains on the dry side. It is unfortunate that we do not have either export sales data or Commitment of Traders reports at this time, but heavy noncommercial selling was also a likely part of Tuesday's drop as net longs had increased quickly in December. In spite of the drop, market factors for cash corn still favor higher prices into early summer.

SOYBEANS March soybeans are up 4 1/4 cents early Wednesday, also seeing a modest bounce after Tuesday's 10 1/4 cent drop. Like corn, soybean prices may have been startled by chances for light rain in south-central Brazil, but unlike corn, the big concerns for soybean prices in 2019 are related to trade talks with China and the status of China's 25% tariff on U.S. soybeans, in particular. President Trump has cited China's slower economy as a sign that tariffs are working to nudge China closer to a trade agreement with the U.S. However, Dow Jones reported Senator Grassley was told by U.S. Trade Representative Lighthizer that China has not moved on structural trade issues. The next talks are set to begin on January 30 as time is slipping ahead of the March 1 deadline. Meanwhile, March soybean futures are holding sideways, above the December low of $8.80.

WHEAT March K.C. wheat is up 3 1/2 cents early Wednesday with similar gains in Chicago and Minneapolis. As winter crops in the Northern Hemisphere lay dormant, winter conditions are being reported as mostly favorable in the main wheat regions so far. Of course, there is still plenty of uncertainty about how spring conditions will go, but traders are not finding much to react to at this time. U.S. wheat prices are cheap enough to be competitive internationally, but with USDA unable to provide export sales data, there is not much reason to believe that wheat's sluggish pace of U.S. export sales has changed much in the past month. After posting a low of $4.82 1/4 in November, March K.C. wheat prices have held sideways.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.39 -$0.07 -$0.33 Mar $0.003
Soybeans: $8.02 -$0.10 -$0.91 Mar -$0.002
SRW Wheat: $4.86 -$0.02 -$0.25 Mar $0.008
HRW Wheat: $4.70 -$0.04 -$0.25 Mar -$0.008
HRS Wheat: $5.24 -$0.03 -$0.38 Mar $0.000

Todd Hultmancan be reached at todd.hultman@dtn.com

Toddcan be followed throughout the day on Twitter @ToddHultman1

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Todd Hultman