DTN Before The Bell Grain Comments

Morning CME Globex Update:

Corn 3/4 lower. Soybeans 2 1/2 lower. Wheat 3 1/4 lower. While the stock market is in sudden meltdown, the grain markets' lack of momentum looks pretty good, compared to the alternative. If the jittery tone of Wednesday morning continues through the day, investors may continue to flee away from risk during the trading session. That's positive for 'safe' assets like gold and the U.S. dollar, but negative for stock and commodity prices.

Other Markets:

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

Corn:

Corn prices have started Wednesday morning with the same lack of momentum that has characterized most of the past several weeks, but there will be jitters throughout the trading world now that confidence in the stock market has started to crack. Total open interest in the corn market has risen 14 percent since the start of the year while investors were accumulating fresh capital from skyrocketing stocks. If Tuesday's 1.2 percent drop in the S&P 500 Index is followed by more of that bubble-bursting pattern through the end of the week, then it's possible those same investors will need to sell off their outside positions, like commodities, to cover their portfolios' stock market losses. The bullish news for corn market participants is that most of the newest speculative positions in corn futures and options have been bearish -- which means that the potential closing of those positions would involve short covering -- and short covering would be positive to corn prices. But back in the world of physical reality, the cash corn market has so far remained stable. The DTN National Corn Index, an average of cash bids around the country, came to $3.21 Tuesday, and the national average basis level stayed at 40 cents under the May futures contract.

Soybeans:

The soybean futures market continues to cling to the nice round number of $10.00 -- the May contract hasn't ventured more than 9 cents away from that level in the past six sessions, including the overnight session that carried into Wednesday morning with that same stability and same lack of momentum. Fundamentally, the soybean market faces bearish pressure from a seasonal tendency to react to the record-large crops in South America, and U.S. port prices are looking less and less favorable compared to Brazil's and Argentina's offers. Higher Malaysian palm oil prices and a relatively strong performance by soybean oil futures overnight helped to counteract the bearish influence of outside markets early Wednesday morning. In the cash soybean market, national average soybean basis remained steady Tuesday at 78 cents under the May futures contract, bringing the DTN National Soybean Index to $9.24. At 8 a.m. USDA reported 120,000 mt of soybeans sold to China for delivery in 2017-2018.

Wheat:

The rain forecast for U.S. winter wheat country is mostly favorable this week, which is bearish to prices, and futures traders may justifiably feel confident that even though the 2017 crop doesn't look great right now, nevertheless our huge domestic inventories of wheat aren't likely to disappear just yet. Furthermore, foreign wheat buyers will interpret favorably wet forecasts for Australia in the Southern Hemisphere and Russia in the Northern Hemisphere as further justification for bearish confidence in global wheat supplies. In the U.S. cash market Tuesday, the national average SRW basis strengthened to 43 cents under the May Chicago contract (SRW Index at $3.84) and the HRW Index remained steady at 92 cents under the May Kansas City contract (HRW Index at $3.46). Spring wheat bids also strengthened, with the national average basis bid at 41 cents under the May Minneapolis futures contract and the national average price at $4.97. At 8 a.m. USDA reported 120,000 mt HRW sold to Saudi Arabia for delivery in 2016-2017.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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