DTN Before The Bell Grain Comments

Morning CME Globex Update:

Currency traders are actively pushing up the U.S. Dollar Index based on indications that the Fed may raise interest rates this month. So far, morning grain trading volumes have been relatively light and the markets have been more interested in following Tuesday's direction than in worrying about the dollar.

Other Markets:

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

Corn:

Lent has started and now it's time for Brazil's Carnival celebrators to turn down the music, sweep up the streamers and get back to work. South American farmers who are planting a second crop of corn will find favorable soil conditions, but in the near term, supplies haven't severely pressured global prices, and U.S. corn remains competitive, hitting the Gulf with a price tag around $4.15 per bushel. On the other hand, the U.S. Dollar Index is surging Wednesday, which would traditionally be bearish to grain prices, but so far, grain futures have kept a positive tone through the morning. Now that all the trading sessions of February are complete, the average February closing price for the new-crop December corn futures contract turned out to be $3.96, which will serve as a reference price for 2017 crop insurance products. Looking at old-crop cash bids around the country, the DTN National Corn Index came to $3.31 Tuesday, and the national average basis level remained steady at 43 cents under the May futures contract. There were zero deliveries in the March corn or ethanol futures contracts Tuesday.

Soybeans:

Rumblings about regulatory changes that could spur more domestic biodiesel production passed through the soybean market Tuesday the same way most rumors pass through -- with a brief burst (prices up as high as 34 cents) that died down before the session closed up only 13 3/4 cents. On the other hand, the soybean chart had been drooping through the latter half of February, and that one spark of bullishness, no matter how legitimate it may or may not be, seems to be enough to motivate a turnaround. Most contracts have remained in positive territory all through the overnight session, with some almost a dime higher as the morning wears on. The average February close of the new-crop November soybean futures contract came to $10.19, a reference level at which most farmers should be able to pencil in a profit in 2017. Old-crop prices are less appealing -- the DTN National Soybean Index came to $9.53 Tuesday, with the average basis bid now as wide as 83 cents under the May futures contract. There were 565 expiring March soybean contracts issued and stopped for delivery Tuesday, as well as 253 March soybean meal contracts and 844 March soybean oil contracts.

Wheat:

Wheat futures across the board have followed the positive indications from corn and soybeans, shrugging off the traditionally bearish influence of a surging U.S. dollar index Wednesday morning. Comments by members of the Federal Reserve board have convinced currency traders again that an interest rate hike may be likely this month. The average February close of the new-crop September Minneapolis spring wheat contract came to $5.65, so spring wheat isn't likely to draw a lot of acres away from soybeans. Old-crop spring wheat prices still show relatively strong basis, at 41 cents under the May Minneapolis contract. But weakness in the basis bids for Hard Red Winter wheat (now an average of $1.01 under the May Kansas City futures contract, or $3.62 cash) keeps the physical old-crop market at an atypical discount to the Soft Red Winter wheat market. The SRW Index came to $3.96 Tuesday, or 48 cents under the May Chicago contract. There were 719 expiring March Chicago wheat contracts issued and stopped for delivery Tuesday, as well as 142 March KC wheat contracts and three Minneapolis Spring Wheat contracts.

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com.

Follow Elaine Kub on Twitter @elainekub

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