DTN Before The Bell Grain Comments

Broad Market Momentum Keeping Grains From Correcting

Elaine Kub
By  Elaine Kub , Contributing Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Corn 1/4 lower. Soybeans 1 lower. Wheat 1/4 higher. Investors with gains from the stock market may be distributing their wealth into commodities, too. After double-digit soybean gains Wednesday, the grain and oilseed markets paused overnight. Bullish export sales progress for corn and soybeans may justify a direction during Thursday's session.

Other Markets:

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

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Corn:

Export sales progress has been bullish for corn, with 42.1 million bushels shown in the weekly report Thursday morning. Meanwhile, ethanol production in the U.S. continues at a favorable pace, above 1 million barrels per day, but with inventories growing uncomfortably large, there is a risk to the corn market that this demand sector may someday slacken. That's on top of the more nebulous geopolitical risks of changing trade patterns with our biggest customers, and the general risk that the chart -- after rallying almost 50 cents over the past 10 weeks with no major bullish story to drive it -- might pull back in correction. For the meantime, however, momentum buying has sustained the corn market's upward trend, and futures are still within a few cents of Wednesday's highs: $3.79 on the front-month chart and $4.02 3/4 on the December chart. Looking at old crop cash bids around the country, the DTN National Corn Index came to $3.42 Wednesday, and the national average basis level remained steady at 37 cents under the March futures contract.

Soybeans:

Overnight, soybean futures explored both lower and higher territory and traded within a penny of last week's $10.63 1/2 high, so there doesn't appear to be a widespread desire to pull the market back after Wednesday's double digit gains. The weekly export sales report was considered bullish, with 40.3 million bushels of soybeans listed. With half of February already on the books, the timeframe when crop insurance reference prices are set, so far new crop soybean futures look historically favorable to new crop corn prices, with the ratio between the two prices higher than 2.5-to-1. On the other hand, that consideration may not affect farmers' planting decisions as heavily as spring weather will once planting season actually rolls around. The DTN National Soybean Index surged to $9.87 Wednesday, but country bidders resisted the movement by trimming their basis bids, especially in light of continued transportation challenges to the PNW, and the average U.S. basis weakened to 75 cents under the March futures contract.

Wheat:

The benchmark front-month Chicago wheat chart has already gained more than 35 cents this month amid widespread commodity buying interest. The weekly export sales report, showing 21.6 million bushels of wheat, may not influence the market much during Thursday's session. Even though there aren't many fresh bullish news items to drive the recent rallies in the amply-supplied grain and oilseed markets, speculative investors have been accumulating sudden gains in the optimistic global stock markets, and they may be bring their buying interest into commodities, like wheat, in order to diversify their holdings. The new record high in the S&P 500 Index is now 2,351 points from Wednesday, but that record may not stand if momentum continues to build through Thursday's session. Wheat basis bids remained steady Wednesday, with the SRW Index at $4.18 or 37 cents under the March Chicago contract; and the HRW Index at $3.78 or 91 cents under the March Kansas City contract; and the Spring Wheat Index at $5.30 or 40 cents under the May Minneapolis futures contract.

Elaine Kubcan be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter@elainekub

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Elaine Kub