DTN Early Word Grains

Monday the 13th: The Backside of a Harvest Weekend

6:00 a.m. CME Globex:

March corn was fractionally lower, March soybeans were 6 cents lower, and July Kansas City wheat was 1 cent lower.

CME Globex Recap:

Harvest weekends, in this case South American, tend to have offsetting, bookending trade in grains. And with last Friday's session showing a solid rally in corn and soybeans, it's not overly surprising the overnight session saw both markets come under pressure. Wheat was also lower, with all three markets showing small losses early Monday. Outside commodities were mixed with metals mostly higher, softs mixed, and energies mostly lower. Both the U.S. dollar index and DJIA futures were showing early gains.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 96.97 points (0.5%) higher at 20,269.37. The NASDAQ Composite gained 18.95 points (0.3%) to 5,734.13 and the S&P 500 added 8.23 points (0.4%) to 2,316.10 Friday. DJIA futures were 37 points higher early Monday morning. Asian markets were higher with Japan's Nikkei up 80.22 points (0.4%), Hong Kong's Hang Seng gained 136.00 points (0.6%), and China's Shanghai Composite added 20.14 points (0.6%). European markets were also higher Monday with London's FTSE 100 up 0.45 point, Germany's DAX gaining 65.41 points (0.6%), and France's CAC 40 up 34.81 points (0.7%). The euro was unchanged at 1.0641 while the U.S. dollar index added 0.07 to 100.77. March 30-year T-Bonds were 14/32 lower at 151'15 while April gold fell $4.10 to $1,231.80. Crude oil lost $0.36 to $53.50 while Brent crude fell $0.39 to $56.31. Dalian soybean futures were slightly higher while March Malaysian palm oil futures lost 24 ringgits overnight.

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BULL BEAR
1) Weekly export inspections could come in bullish for corn Monday morning. 1) The recent round of noncommercial buying in corn could lead to short-term liquidation.
2) Weekly export inspections are also expected to be bullish for soybeans. 2) Soybean basis and futures spreads remained bearish last week, possibly indicating the seasonal slowdown in export demand is at hand.
3) New-crop winter wheat contracts have established solid uptrends on weekly charts. 3) Weekly export inspections of wheat could be disappointing given USDA's increased demand projection.

The weekly Newsom on the Market column can be found on subscription sites only. On DTN Pro it is in News/Town Hall and on MyDTN in News/Columns.

MORE COMMODITY-SPECIFIC COMMENTS

CORN The corn market was quiet overnight, again, with both old-crop March and May (now showing the highest open interest) posting 1 1/4-cent trading ranges through early Monday morning. Minor (short-term) trends on their respective daily charts remain up, though both contracts are showing signs of being short-term overbought. Last Friday's CFTC Commitments of Traders report (legacy report) showed noncommercial interests adding 20,159 contracts to their net-long futures position (as of Tuesday, February 7), putting it at 117,182 contracts. This is the largest net-long futures position in corn dating back to the week of July 19, 2016 (130,624 contracts). The combination of overbought markets and a large noncommercial futures position often leads to a round of liquidation. Fundamentally demand remains strong for U.S. corn, with the next update being Monday's weekly export inspections (for the week ending Thursday, February 9). Last Friday saw national average basis weaken to 37 cents under (DTN National Corn Index minus the close of March futures), with the previous Friday showing national average basis of 35 3/4 cents under. As for new-crop December, its average daily close in February so far (for initial insurance guaranteed price purposes) is roughly $3.99. Last year's came in at $3.86.

SOYBEANS Both old-crop and new-crop soybeans were under pressure early Monday morning, spending most of the overnight session below Friday's close. Despite last week's rally the minor (short-term) trend for old-crop March remains down on its daily chart with the contract testing resistance at $10.59 with its highs Wednesday through Friday. Note that March soybeans closed right at that resistance level last Friday. Initial short-term support is at Friday's low of $10.47 1/2. Traders will keep an eye on weekend harvest results out of Brazil, as well as extended weather forecasts for South America. Fundamentally demand remains strong for U.S. soybeans, with another solid number expected in Monday's weekly Export Inspections report (for the week ending Thursday, February 9). However, last week saw the carry in the March-to-May futures spread strengthen to 11 cents while national average basis hold steady at a weak 75 3/4 cents under (DTN National Soybean Index minus the close in March futures). Some of this was likely due to the rally in the March futures contract (32 cents for the week), though seasonally the U.S. is reaching the point of decreased weekly exports. Regarding new-crop November, its average daily close in February (for initial insurance guaranteed price purposes) so far is approximately $10.20. Last year's came in at $8.85.

WHEAT Winter wheat markets were also under pressure Monday morning due to light spillover selling from the other grains. As discussed in this past weekend's Technically Speaking blog on DTN, new-crop July contracts for both Chicago and Kansas City are showing solid uptrends. However, both are nearing an overbought situation while testing initial target prices on their respective weekly charts. As for the wheat market in general, it will be interesting to see what weekly export inspections are for the week ending Thursday, February 9. Recall that USDA upped its export demand projection by 50 mb to 1.025 bb for all wheat, despite data showing exports were just on pace with the previous projection of 975 mb. Traders will continue to monitor weather forecasts for the winter wheat growing area with much above normal still being registered across much of the U.S. Midwest and Southern Plains.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.37 $0.05 -$0.37 Mar -$0.004
Soybeans: $9.83 $0.09 -$0.76 Mar $0.002
SRW Wheat: $4.12 $0.06 -$0.37 Mar $0.008
HRW Wheat: $3.69 $0.09 -$0.91 Mar -$0.003
HRS Wheat: $5.32 $0.04 -$0.39 May $0.004

Darin Newsom can be reached at darin.newsom@dtn.com

Darin can be followed throughout the day at www.twitter.com\DarinNewsom

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