DTN Early Word Grains

By Darin Newsom
DTN Senior Analyst

6:00 a.m. CME Globex:

May corn was 1 cent lower, May soybeans were 5 cents lower, and July Kansas City (HRW) wheat was fractionally lower.

CME Globex Recap:

Grains remained on the defensive overnight into Friday morning, still pressured by reaction to Thursday's bearish round of monthly world supply and demand numbers. Soybeans continue to lead the way, and rightfully so, with corn and wheat quietly following along behind. Outside markets were mixed as the energy complex tried to recover some of this week's sharp sell-off. Gold continued under pressure heading into Friday's February jobs data, itself a lead-in to next week's Federal Reserve meeting and expected interest rate increase. And though financial traders are looking for bullish jobs numbers, the U.S. dollar index is lower while DJIA futures post a solid rally.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 2.46 points higher at 20,858.19. The NASDAQ Composite added 1.26 points to 5,838.81 and the S&P 500 gained 1.89 points to 2,364.87 Thursday. DJIA futures were 66 points higher early Friday morning. Asian markets were mostly higher with Japan's Nikkei up 286.03 points (1.5%), Hong Kong's Hang Seng gaining 67.11 points (0.3%), and China's Shanghai Composite down 3.99 points (0.1%). European markets were also mostly higher Friday with London's FTSE 100 up 32.15 points (0.4%), Germany's DAX gaining 72.98 points (0.6%), and France's CAC 40 up 26.99 points (0.5%). The euro was 0.0031 higher at 1.0608 while the U.S. dollar index lost 0.18 to 101.85. June 30-year T-Bonds were 4/32 lower at 146'22 while April gold fell $6.70 to $1,196.50. Crude oil rallied $0.29 to $49.57 while Brent crude added $0.27 to $52.46. Dalian soybean and Malaysian palm oil futures were both lower overnight.

	BULL		BEAR
1)	Technically, both old-crop and new-crop corn futures are nearing short-term lows.	1)	Corn production estimates for both Brazil and Argentina were raised in Thursday's WASDE report.
2)	Soybean markets are nearing oversold situations.	2)	Despite increased global demand, USDA lowered its estimate of U.S. soybean exports.
3)	Weather conditions across the U.S. Southern Plains remain challenging for the HRW wheat crop.	3)	World ending stocks of wheat are expected to grow to nearly 250 mmt

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 For better or worse, both old-crop May and new-crop December corn look to be nearing the completion of their respective short-term downtrends on daily charts. A bearish round of world supply and demand numbers, most notably increased production estimates for both Brazil and Argentina, sent old-crop May through support at $3.86 1/4 with the next target near $3.62. Overnight trade saw the contract hit $3.67. Spillover pressure from old-crop, and a lack of change in old-crop ending stocks, pushed new-crop December through support at $3.89 3/4 and toward the lower target of $3.85 (overnight low of $3.86 1/2). Both have momentum short-term momentum indicators nearing oversold levels, meaning a turnaround could be seen in the coming days (for more information, see this week's On the Market column to be posted later Friday morning). There were no new deliveries reported against the March issue, leaving the total at 519 contracts.

SOYBEANS From a technical point of view, May soybeans are hard to explain. Its daily chart shows a 5-wave downtrend where the normal pattern is three waves. Its weekly chart shows a continued sideways pattern that is gaining bearish momentum. And long-term monthly charts? They still show soybeans (both futures and cash) to be in major uptrends (see Technically Speaking blog posts from Saturday, March 4). Fundamentally though, it isn't hard to understand why soybeans remained on the defensive overnight into Friday morning. After all, USDA did raise its production estimate for Brazil to 108 mmt while leaving its estimate for Argentina alone at 55.5 mmt (as opposed to lowering the latter due to weather concerns). The bottom line is, despite increased global demand, world ending stocks (and domestic ending stocks) increased. CFTC Commitments of Traders reports the last few weeks have shown noncommercial interests liquidating their net-long futures positions, action that has continued into this week. Meanwhile, the strengthening carry in the old-crop May-to-July futures spread has been warning of a more bearish supply and demand situation building. Delivery of another 258 contracts against the March issue was reported, putting the total at 3,643 contracts.

WHEAT Winter wheat contracts were showing small losses early Friday morning, mostly on spillover selling from soybeans and corn. Thursday's WASDE report did show increased production estimates for Argentina and Australia, offsetting gains in total demand so that ending climbed to just short of 250 mmt. Meanwhile, the U.S. Southern Plains HRW wheat growing area continues to hope for rain in the extended forecast. Look for wheat to continue to be a follower heading into the weekend. Delivery of another 24 contracts against the Chicago March issue was reported, putting the total at 4,099 contracts. Kansas City March had 2 contracts delivered, raising its total at 432 contracts.

DTN Cash	Change From	National	Contract	Change from
Commodity	Index	Prev Day	Avg. Basis	Month	Prev Day
Corn:	$3.26	-$0.05	-$0.41	May	$0.001
Soybeans:	$9.32	-$0.10	-$0.79	May	$0.005
SRW Wheat:	$3.99	-$0.03	-$0.45	May	$0.000
HRW Wheat:	$3.69	-$0.03	-$0.94	May	$0.006
HRS Wheat:	$4.96	$0.05	-$0.43	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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