DTN Early Word Grains

Declining Oil Prices Weigh on Soybeans

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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6:00 a.m. CME Globex:

March corn was down 3 1/4 cents, March soybeans were down 7 3/4 cents, and March Chicago wheat was down 3 3/4 cents.

CME Globex Recap:

March soybean were down 7 3/4 cents early Friday, pulled down by new overnight lows in palm oil and soybean oil futures. Corn and wheat are also lower after Thursday's turn from recent highs while the news remains mostly favorable for crops in South America.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed up 7.91 points at 20,619.77. The NASDAQ Composite was down 4.54 points at 5,814.90 and the S&P 500 was down 2.03 points at 2,347.22 Thursday. DJIA futures were down 62 points early Friday morning. Asian markets were lower with Japan's Nikkei down 112.91 points (-0.6%), Hong Kong's Hang Seng down 73.96 points (-0.3%), and China's Shanghai Composite down 27.54 points (-0.8%). European markets were also lower Friday with London's FTSE 100 down 3.88 points (-0.05%), Germany's DAX down 54.63 points (-0.5%), and France's CAC 40 down 46.83 points (-1.0%). The U.S. dollar index was up 0.16 at 100.66 while the euro was down 0.00280 at 1.06570. March 30-year T-Bonds were up 19/32nds at 151'13 while April gold was up $1.00 at $1,242.60. March crude oil was down $0.38 at $52.98 while Brent crude was down $0.51 at $55.14. Soybeans at the Dalian Exchange are lower overnight and Malaysian palm oil futures were down 2.4%.

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BULL BEAR
1) In spite of Thursday's selling, corn and winter wheat remain in up-trends while soybeans' trend is stalling. 1) Palm oil futures fell to a new 12-week low overnight and soybean oil fell to its lowest prices in five months.
2) U.S. corn is still attractively priced for more export business. 2) Increased corn and soybean production from South America is widely anticipated in early 2017 with Brazil's soybean harvest making good progress.
3) Warm temperatures in the southwestern Plains the next several days put winter wheat crops at risk of freeze later. 3) It is still not clear how trade relations will change with China and others -- or how those countries might retaliate.

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MORE COMMODITY-SPECIFIC COMMENTS

CORN March corn was down 3 1/4 cents early Friday, down nearly a dime from Thursday's new high of $3.80, but still showing an up-trend. DTN's seven-day forecast for Brazil shows mostly light rain amounts expected with a chance for moderate amounts in southern Brazil and central Argentina. Overall, crop estimates remain high in South America so it is puzzling why Brazil's corn prices are trading near their highest level in three months other than to say that demand has been good early in 2017. March corn prices continue to benefit from a window of increased demand before Brazil's second crop becomes available this summer.

SOYBEANS March soybeans were down 7 3/4 cents early, showing bearish pressure from a new 12-week low in May palm oil futures overnight which has March soybean oil trading below 33 cents for the first time in five months. Soy products are currently split with meal still trending higher, but Friday morning's new low in soybean oil adds a new bearish twist for March soybean prices and puts them closer to challenging their February low at $10.17. Meanwhile, there is no argument that Brazil has a record soybean crop on the way and harvest is making good progress, likely past 20% complete by now. But at a time when we would expect to see Brazil's soybean prices making new lows and pressuring U.S. prices, we instead see Brazil's soybean prices up over 50 cents from a low made back on Jan. 12. This adds to the confusion in March soybeans as the trend is turning from higher to sideways.

WHEAT March Chicago wheat was down 3 3/4 cents early, taking a cue from corn and also falling back from Thursday's attempt at a new five-month high. Today's highs in the southwestern Plains will be in the 70s as far north as Nebraska which sounds pleasant to most of us, but presents a risk for winter wheat coming out of dormancy too early. However, the issue has been talked about all week and outside of it, it is difficult to find any other bullish argument for wheat prices while the world has plenty. Even after Thursday's reversal, the trend in March Chicago wheat remains higher, but it is hard to expect much more from the trend this early in the year.

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 $0.005
Soybeans: $9.69 -$0.17 -$0.74 Mar $0.004
SRW Wheat: $4.10 -$0.08 -$0.37 Mar -$0.006
HRW Wheat: $3.67 -$0.11 -$0.91 Mar $0.003
HRS Wheat: $5.14 -$0.16 -$0.42 May -$0.016

Todd Hultmancan be reached at todd.hultman@dtn.com

Toddcan be followed throughout the day at www.twitter.com\ToddHultman1

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Todd Hultman