DTN Closing Grain Comments

Grain and Soybean Markets Continue to Slide Lower on Fund Selling

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN illustration by Nick Scalise)

General Comments:

May corn closed down 3 cents per bushel and December corn was down 2 1/2 cents. May soybeans closed down 6 1/2 cents and November soybeans were down 5 1/2 cents. May Kansas City wheat closed down 1 cent, May Chicago wheat was down 7 1/4 cents and May Minneapolis wheat was up 4 1/4 cents.

The March U.S. dollar index is trading up 0.002 at 96.040. The Dow Jones Industrial Average is down 23.06 points at 25,962.10. April gold is down $5.00 at $1,316.20, March silver is down $0.15 at $15.52 and May copper is down $0.0175 at $2.9450. April crude oil is up $0.07 at $57.01, April heating oil is up $0.0018, April RBOB is down $0.0178 and April natural gas is up $0.013.

Corn:

Despite Thursday morning's better-than-expected export sales news, and two private export sales, corn continues its relentless slide -- reaching the lowest level since mid-September. New sales of 133,000 metric tons (mt) were announced sold to South Korea and another 168,000 mt to Mexico for 2018-19. The weekly sales ending on Feb. 21 came in at a decent 48.8 million bushels (mb) for corn. The U.S, has now sold 1.557 billion bushels (bb) of corn, an increase of 2% over last year at this time. Funds have been adding to a larger net-short position, with analysts estimating a net short of 110,000 contracts, including options before Thursday trade. Corn deliveries, at 910 contracts were about as expected, but as typically happens, longs seek to exit to avoid delivery. U.S. corn is facing some stiff resistance from both the Black Sea and South American markets, and recent optional purchases by South Korea are likely to be sourced from South America. The final day of crop insurance price is Thursday and that price for corn is close to $4. Cold and wet conditions continue to hamper U.S. transportation and movement, and have rallied port basis levels sharply. Ag Secretary Perdue has stated that new demand from China will likely involve corn and its byproducts, but we have seen no new sales so far. China is said to be inquiring on corn, soybean and DDG prices daily, according to cash sources. The next stop down for May corn will likely be the $3.67 to $3.68 level. However, with the extent of the new fund net short, the fuel is certainly there for a bullish fire if we get good news from China. DTN's National Corn Index closed at $3.39 on Thursday and reflects an average basis of 35 under May. In outside markets, Thursday's move higher in the U.S. dollar index is a bearish input for commodities.

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Soybeans:

Soybeans continue their three-day slide lower despite better-than-expected export sales for the week ended Feb. 21. Of the 80.7 mb sold, 66 million of that was China and likely part of the previous commitment. China has now bought a total of 9.2 million metric tons (mmt) of U.S. soybeans this year, compared to 26.4 mmt a year ago. Total sales commitments, at 1.432 bb remain 14% or 239 mb below a year ago. Exports of soybeans remain a hefty 32% below last year. The trade is still waiting for some confirmation of last week's China promise to buy another 10 mmt (367 mb), and the question remains as to whether that will be old or new crop or a combination. With Brazil's sharp discount in March on a landed China basis, and that advantage lasting into June, the trade is concerned that there will be no more China buying from the U.S. Weather is nothing but bearish at the moment, with the dry area of southern Argentina expected to get some good rains next week, following recent dryness, and Brazil looking at rains of up to 5 inches in some areas in the next 10 days. The failure of President Trump to reach an agreement with North Korea on nukes is weighing on the markets as well Thursday. The impending spring insurance price will be determined after Thursday, and that average remains close to $9.54. With the soy/corn ratio at 2.41 to 1, and with spring weather a likely problem in the Northern Plains, we could see higher soybean planting than most had expected. DTN's National Soybean Index closed at $8.21 on Thursday and is priced 97 cents below the May futures contract.

Wheat:

Only Minneapolis wheat succeeded in staying above unchanged Thursday, as the recent onslaught of fund, technical and even fundamentally-induced selling sent wheat sharply lower. Since Feb. 13, Chicago May wheat has plunged 66 cents per bushel, while Kansas City May has fallen 74 cents per bushel since Feb. 6. Wheat export sales were about as expected last week at 17.5 mb, but are now up just slightly from a year ago, but exports remain 8% lower. U.S. wheat has missed much of the export business in the past week as Argentina, the Black Sea and EU have satisfied buyers. Upcoming wheat tenders are Thursday's tender by Bangladesh for 50,000 metric tons (mt) of milling wheat and a new Saudi Arabia tender for 595,000 mt of 12.5 protein milling wheat, which the U.S. may have a chance at. Weather in the U.S. this coming weekend and next week, will provide some bitter cold temperatures, with single-digit lows into Oklahoma last night, and next week promising subzero temperatures in parts of Kansas, Nebraska and Oklahoma. Winterkill is surely a threat for unprotected wheat. Another weather issue that the wheat trade is watching is a three-month projection of well below precipitation and above normal temperatures for Australia's east coast. Including options, commission houses estimate that the new net short on Chicago wheat is close to 85,000 contracts, and in Kansas City, closer to 25,000 contracts. The Kansas City record net fund short is said to be 34,000 contracts. No China wheat purchases following weeks of speculation of that, has added to the bearish pall that has been cast over wheat. DTN's National HRW index closed at $4.21 on Thursday, and that is an average basis of 27 under Kansas City May futures.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow Dana on Twitter @mantini_r

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Dana Mantini