DTN Closing Grain Comments

General Comments:

May corn is up 2 1/4 cents per bushel, May soybeans are up 1 1/4 cents, May K.C. wheat is up 1/4 cent, May Chicago wheat is down 2 1/4 cents and May Minneapolis wheat is down 1 1/4 cents. The Dow Jones Industrial Average is up 94.74 points and April crude oil is down $1.32. The U.S. dollar index is up 0.300 and April gold is down $22.40 per ounce.

For the week:

May corn closed down 11 1/2 cents and December 2019 corn was down 7 1/2 cents. May soybeans were down 12 1/4 cents while November 2019 soybeans were down 8 3/4 cents. May Kansas City wheat was down 21 1/4 cents, May Chicago wheat was down 34 1/4 cents, and May Minneapolis wheat was down 6 1/4 cents.

Corn:

Corn had fallen hard for four straight days and was 21 cents below the high made on Monday coming into Friday trade, as commodity funds had recently taken a bearish stance. Various commission houses estimated that with futures and options combined, funds now hold a net short of over 120,000 contracts -- a total reverse of the 200,000 contract futures long that noncommercials held at the end of December. They sold even more early Friday. Friday's CFTC report will be closely watched to assess accurate noncommercial activity. Export sales continue to be good, with corn now higher than last year, and on a pace to beat the USDA projection, but recent competition from both the Black Sea and newly harvested South American crops has put that pace in jeopardy going forward. Perhaps the most disappointing has been the lack of Chinese purchases of U.S. corn despite the constant barrage of rumors. This week's March futures delivery period has also weighed on corn futures, as March longs have exited to avoid delivery. So far, nearly 2,000 contracts of corn have been delivered with no relevant commercial taker in sight. While wheat is the poster child for a market that is oversold technically, corn is not far behind, with May having hit the lowest price since mid-September. While it would be a scary proposition to be short at new recent lows with the large fund short and a possible China announcement expected at some point, there is no hint that it will happen soon. Perhaps Friday's late rally was a sign of impending demand. DTN's National Corn Index closed at 3.38 on Friday and reflects an average basis of 33 under May. In outside markets, equities were once again higher on U.S.-China trade optimism, while the U.S. dollar index was higher and crude oil lower.

Soybeans:

The soybean market gave us a head fake in Thursday overnight and early Friday trade, but reversed to fall sharply lower at midsession, before staging a sharp late-day rally, and ending higher. Noncommercials had grown tired of seeing no new business or confirmation of the promised second 10 million metric ton purchase by China, and have added to bearish bets. Domestic soy exporters are likewise wondering when we'll see some indication of when those soybeans might be purchased and shipped. Brazil soybean offers continue to fall in an effort to get a share of business as their harvest advances. Brazil offers are said to be anywhere from 25 to 50 cents per bushel cheaper than U.S. soybeans nearby, with a smaller discount out to June. Argentine beans are even cheaper. Last week's U.S. soy sales of 80.7 million bushels were large and included mostly China, but that was not enough for this market, with total sales down 14% from year ago, and shipments down 32%. Weather in South America has taken a bearish turn, with plentiful rains projected for the recently dry southwest Argentine soy fields, and Brazil thriving on daily rains. Also bearish is news that China soymeal demand will likely be 5% to 10% lower due to expanding African swine fever. One cash-connected commission house expects the China pig population to fall by 15% to 30%. With a total herd of 700 million hogs, that is no small loss of demand. November soybeans had fallen nearly 30 cents per bushel just since Monday, before Friday's late recovery, pressured by ideas of increased soybean acreage with the expected late spring and a 2.42% soy-corn ratio signaling more soy acres. DTN's National Soybean Index closed at $8.16 on Friday, 94 cents below the May futures contract.

Wheat:

To put it mildly, wheat has been a "dog in dog's clothing" of late, having fallen a stunning 86 cents in Chicago and 87 cents in Kansas City just since Feb. 6, before Friday's late session turnaround. In that time, funds had been selling and adding to a growing short position leading to an extreme level of "oversold." You would need to go far back to find an RSI (relative strength index) of sub-22 and a slow stochastics reading of just 3 -- that was the case at midmorning on Friday. U.S. wheat has missed a lot of export business lately, but Friday's 595,000 mt (21.8 million bushels) Saudi Arabian tender for high protein hard wheat will hopefully result in some U.S. wheat being sold. The bitter cold U.S. temperatures this weekend and early next week will keep winterkill in conversations. The market seems little concerned about that now. U.S. wheat export sales just vaulted above last year's pace, but with shipments still lagging by 8%, the fear is that carryout could be a burdensome 1 billion bushels again, with overseas production expected to surge. Friday's late-session rally should give a bullish spin to next week's beginning trade. DTN's National HRW Index closed at $4.24 on Thursday, an average basis of 21 under Kansas City May futures.

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

Follow Dana on Twitter @mantini_r

(CZ)

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