DTN Before The Bell Grain Comments

Pre-Holiday, Profit-Taking Pressures Grains

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

Morning CME Globex Update:

Recent rallies in corn, soybeans and wheat are experiencing a correction alongside widespread outside market profit-taking during the last trading session before the President's Day holiday.

Other Markets:

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

Corn:

Fairly active futures selling Friday morning has given the corn market a lower tone, with prices down about 3 cents across the board, and traders may continue to use the session to close out positions before the Presidents Day holiday on Monday. On Thursday, USDA released its long-term agricultural projections through the year 2026, and although "demand for U.S. corn is projected to grow steadily over the next decade," USDA economists see that growth driven more by the livestock feed sector than by ethanol or exports. Cattle prices are likely to end lower this week. That market is still much weaker than it has been in recent years, but given the outlook for affordable feed prices, some profits are being made and some livestock expansion is indeed occurring -- not just in cattle and not just in the U.S. In the cash corn market, the DTN National Corn Index, an average of cash bids around the country, came to $3.37 Thursday, and the national average basis level remained steady at 37 cents under the March futures contract.

At 8 a.m. CT, private exporters reported to the U.S. Department of Agriculture export sales of 194,112 metric tons of corn for delivery to Japan. Of the total, 60,000 metric tons is for delivery during the 2016-17 marketing year and 134,112 metric tons is for delivery during the 2017-18 marketing year.

Soybeans:

The soybean market is leading the ag commodity losses Friday morning, with 7-cent to 10-cent losses that have taken the March contract as low as $10.34. After a week of wild gains in the stock market, and widespread speculative investment in outside markets, it may come as no surprise that the final session before a three-day weekend may be marked by profit-taking and widespread selling. Nearby soybean oil futures have dropped more than 5% off last week's high, alongside a lower correction in the March Malaysian palm oil contract. The DTN National Soybean Index dropped by double-digits Thursday, coming to $9.69 per bushel, but basis bids strengthened slightly to 74 cents under the March futures contract.

Wheat:

"A stronger dollar is expected to weigh on U.S. agricultural exports [through 2026] as it increases the relative price of U.S. exports," according to fresh long-range projections from USDA, released on Thursday. And on a micro level, that prophecy seems to be coming true Friday morning, with the U.S. dollar index higher, and most wheat and other grain futures lower. The May Minneapolis spring wheat futures contract couldn't find buyers above $5.70 Thursday, then collapsed in a disappointed sell-off at the end of the day, but small futures gains at the start of Friday's session may reassert this wheat variety's uniquely bullish fundamental supply-and-demand situation, especially compared to the over-abundant global feed wheat market. Winter wheat basis bids remained steady Thursday, with the SRW Index at $4.10 or 37 cents under the March Chicago contract; and the HRW Index at $3.67 or 91 cents under the March Kansas City contract. Meanwhile, spring wheat bids weakened alongside the futures loss, taking the national average price to $5.14 and the national average basis bid to 42 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