DTN Before The Bell Grain Comments

Morning CME Globex Update:

Corn 1/2 lower. Soybeans 5 3/4 lower. Wheat 2 3/4 higher. Nearby soybean and corn contracts are at their lowest levels in 2017. Winter wheat contracts are the only futures market currently affected by drought in the U.S., which is reflected by their independent gains while row crop prices continue to erode. Outside markets are relatively calm, with the U.S. dollar stabilizing and crude oil clawing upward toward $48 per barrel.

Other Markets:

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

Corn:

Total open interest in corn futures has continued to surge through this week, showing that investors who may be spooked by the stock market's hiccup haven't entirely gone to ground, but they may be looking around for diversified assets to provide some cover. Unfortunately for corn market bulls, that speculative interest may be mostly bearish short-selling ahead of next week's round of government reports. Private pre-report guessers don't expect to see Quarterly Grain Stocks show unusual feed usage, and they almost all anticipate a 2017 corn acreage number higher than USDA's baseline 90 million acres from back in February. The new crop December futures contract is on track to post a 10-cent loss this week, and the nearby contract may also have a double-digit lower weekly performance by the time Friday's session is closed. The DTN National Corn Index, an average of cash bids around the country, came to $3.17 Thursday, and the national average basis level remained steady at 39 cents under the May futures contract.

Soybeans:

This is the fourth straight session when soybeans have started the day with lower prices, and that steady erosion on the chart may start to turn into a landslide. The May contract hasn't traded as low as $9.85 since October, and if the front-month chart slips even two additional cents lower through Friday's session, the market could hit pockets of stop orders, and prices could become volatile a week earlier than everyone was expecting. The Quarterly Grain Stocks report and the annual Prospective Plantings report from the USDA will be released next Friday, so grain and oilseed traders will remain obsessed with pre-report guesses and pre-report trade positioning through the next week. For farmers considering pre-report hedging, note how futures that have dropped below $10.00 per bushel mean that cash prices aren't so far from losing their $9 handle. The average new crop soybean bid collected by DTN Thursday was $9.20 and the spot DTN National Soybean Index was $9.14, with average soybean basis remaining steady at 77 cents under the May futures contract.

Wheat:

Wheat is one of the few commodities posting positive prices Friday morning as this market continues to ignore the row crops' lower tone. This week's U.S. Drought Monitor map showed its yellow cloud of abnormally dry conditions has expanded farther across Kansas and into more nooks and crannies of the Southern Plains and Delta states. This doesn't bode particularly well for winter wheat yields (or acreage, in the event that fields get abandoned in favor of row crops), and perhaps this concern is helping to prop up the futures charts' quiet consolidation. On the other hand, adequate soil moisture in the Northern Plains and a long-term outlook for normal weather should allow spring wheat planting to occur unimpeded on whichever proportion of acres farmers choose to plant to that crop. The average new crop spring wheat bid collected by DTN Thursday was $5.08 per bushel. Meanwhile, the spot priced SRW Index came to $3.79, showing national average SRW basis steady at 42 cents under the May Chicago contract, and the HRW Index at $3.36 showed average basis steady at 92 cents under the May Kansas City contract.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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