DTN Before The Bell Grain Comments

Grain Markets Search for Direction

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

Morning CME Globex Update:

Corn 1/2 lower. Soybeans 3 3/4 higher. Wheat 2 1/2 lower. Futures for the hard wheat varieties are also lower. Light trading volumes were seen in grain and soybean futures during the early part of Friday's session, suggesting that most of the day's business will be conducted later, and that may bring a change of direction as the end of the week approaches.

Other Markets:

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

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Corn:

After volatile trading sessions earlier this week, the crude oil market, the U.S. Dollar Index, and the U.S. stock indices all appear to be stable on Friday morning, which removes one potential source of direction for the otherwise directionless corn market. The weather forecast for U.S. corn planting continues to be a little too wet to be helpful. By this time last year, about 30 percent of the crop was planted, but this year, it's likely that Monday's Crop Progress report will again show the planting pace is slower than average. Still, futures prices probably won't build in any risk premium for this factor while it's still April. The DTN National Corn Index, an average of cash bids around the country, came to $3.22 Thursday, with the national average basis level steady at 36 cents under the May futures contract.

Soybeans:

Soybean futures tested both directions during overnight trade, with a bias toward moving upward and away from their April lows. Most of the managed money's open interest has already moved to the July contract. Meanwhile, the nationwide average new crop cash bids Thursday were $8.82 for soybeans (71 cents under the November contract) and $3.40 for corn (42 cents under the December contract) -- in other words, the soybean-to-corn price ratio on the futures board may look historically "normal," but in actual cash terms, it sits at 2.6-to-1, which still economically favors soybean acres anywhere that seed and other inputs haven't already been purchased and put in place. For the remaining old crop of soybeans, whose pace of business through U.S. export facilities has slowed down, the DTN National Soybean Index was $8.75 Thursday, with average soybean basis remaining steady at 72 cents under the May futures contract.At 8 a.m. USDA reported 146,000 mt of soybeans sold to Unknown for delivery in 2016-2017.

Wheat:

The futures spreads between nearby winter wheat contracts have widened in recent weeks and continued to do so during Thursday's bearish trading session and again Friday morning, suggesting that commercial grain handling facilities are anticipating huge inventories of wheat to arrive this summer. The July-to-September spread for KC Hard Red Winter Wheat widened to as much as 16 1/2 cents overnight. This market indicator -- along with a rainy forecast, a downward trend on the wheat futures charts since February, and weak basis bids -- taken altogether, paint an unrelentingly bearish picture for the wheat market. Due to Thursday's collapse in winter wheat futures prices, the country's cash bids also dropped by double digits. The SRW Index fell to $3.67, with national average SRW basis weaker at 40 cents under the May Chicago contract. The HRW Index at $3.14 showed average basis slightly stronger at 89 cents under the May Kansas City contract, and the average spot spring wheat bid collected by DTN Wednesday was $4.87 per bushel, or 40 cents under the May Minneapolis contract.

Elaine Kubcan be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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Elaine Kub

Elaine Kub
Connect with Elaine: