DTN Before The Bell Grain Comments

Morning CME Globex Update:

Corn 1 1/4 lower. Soybeans 4 lower. Wheat 3 1/4 lower. Speculative buying enthusiasm in the stock markets may not spill over into commodities. The downward trend of the U.S. Dollar Index is continuing Wednesday morning, but the upward trends in soybeans, corn, and wheat seem to have run out of fresh bullish momentum. Feed demand and global oilseed prices may be supportive, but that support is already priced in.

Other Markets:

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

Corn:

The corn market experienced losses Tuesday that have carried over into Wednesday morning and taken the luster off what was a respectable short-term rally, but the front-month chart remains above $3.60 and December 2017 futures are still within a dime of $4.00. An upcoming cattle-on-feed report this Friday is expected by analysts to show December placements into feedlots up 8.8 percent over last year, demonstrating corn's robust feed demand from the livestock sector. Similarly, ethanol production is likely surpassing one million barrels per day again this week, but these strong demand factors are inherently influenced by corn's relatively cheap and stable price outlook. The market probably doesn't have to bid much higher in order to get this abundantly available substance into end user's hands -- remember that the ending stocks-to-use ratio is projected to be an ample 16 percent. Looking at nearby cash bids around the country, the DTN National Corn Index came to $3.28 Tuesday, and the national average basis level remained steady at 36 cents under the March futures contract. At 8 a.m., USDA reported 141,224 mt of corn sold to Unknown destinations for delivery in 2016-2017.

Soybeans:

The Malaysian palm oil market experienced a wild trading session on Tuesday then corrected itself lower on Wednesday, but is still within 2 1/2 percent of its recent four-year high. Similarly, soybean oil and soybean futures have lightly backed off their recent highs. Total open interest in soybean futures remains as large as it has been since December, suggesting that the eager speculative market bulls haven't yet sold off their new long positions but are instead still waiting for a fresh bullish argument to help the chart swing another leg higher. The separate outlooks for soybeans and corn may become a self-correcting problem by next fall -- the price ratio for new crop soybean futures over new crop corn futures is presently 2.6-to-1, and U.S. farmers are expected to favor the economics of planting soybeans. The DTN National Soybean Index came to $9.82 Tuesday. The national average basis level strengthened to 76 cents under the March futures contract.

Wheat:

The S&P 500 stock index surged to a record high of 2284.63 on Tuesday, and the Dow Jones Industrial Average could potentially make a run at the psychologically resonant 20,000-point level sometime on Wednesday, putting equity speculators in a buying mood, but not one that seems to be spilling over into wheat and other commodity markets so far Wednesday morning. The U.S. Dollar Index is lower, which is traditionally a bullish signal to commodities, but lately that indication hasn't been a good predictor of daily direction. The dollar trade has been more of a risk-on/risk-off measure of global uncertainty, rather than an expression of traders' outlook for U.S. economic health and interest rates. In this uncertain environment, the U.S. futures contracts for all three varieties of wheat are moving lower Wednesday morning alongside downward corrections in the corn and soybean markets. Basis bids strengthened for the hard wheat varieties Tuesday, with the HRW Index at $3.48 or 93 cents under the March Kansas City contract and the Spring Wheat Index at $5.22, which showed an average basis bid of 40 cents under the March Minneapolis contract.

ElaineKubcan be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @ElaineKub

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