DTN Early Word Grains

By Darin Newsom
DTN Senior Analyst

6:00 a.m. CME Globex:

December corn was fractionally higher, January soybeans were 4 cents higher, and December Kansas City (HRW) wheat was 1 cent lower.

CME Globex Recap:

Early Wednesday morning showed markets in the grain and oilseed complex flipped from Tuesday's close with corn, soybeans, and Minneapolis wheat higher while Chicago and Kansas City wheat were both lower. As has been the case for weeks, there was little fresh news to provide direction to the markets overnight. Other commodity sectors were mostly lower though cotton and gold were both able to post small rallies. The U.S. dollar index remained under pressure, while DJIA futures posted a triple-digit sell-off hinting at another breakdown when the Big Board opens later Wednesday morning.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 30.23 points (0.1%) lower at 23,409.47, the NASDAQ Composite lost 19.72 points (0.3%) to 6,737.87, and the S&P 500 fell 5.97 points (0.2%) to 2,578.87 Tuesday. DJIA futures were 137 points lower early Wednesday morning. Asian markets closed lower with Japan's Nikkei 225 down 351.69 points (1.6%), Hong Kong's Hang Seng off 300.43 points (1.0%), and China's Shanghai Composite down 27.02 points (0.8%). European markets were trading lower with London's FTSE 100 down 39.93 points (0.5%), Germany's DAX falling 163.67 points (1.3%0, and France's CAC 40 losing 30.42 points (0.6%). The euro was 0.0041 higher at 1.1840 while the U.S. dollar index dropped another 0.31 to 93.52. December 30-year T-Bonds were 30/32 higher at 153'26 while December gold gained $2.90 to $1,285.80. Crude oil was $0.70 lower at $55.00 while Brent crude lost $0.81 to $61.40. China's Dalian soybean futures were lower and Malaysian palm oil futures were mixed overnight.

	BULL		BEAR
1)	Noncommercial traders are already short corn futures meaning a round of short-covering is possible at any time, warranted by fundamentals or not.	1)	"Smart money" isn't buying corn, but rather using the strong carry in futures spreads to roll position to deferred contracts.
2)	Beyond the January-to-March soybean futures spread, the market's forward curve remains neutral.	2)	Noncommercial traders continue to hold a net-long futures position in soybeans, leaving the door open to "sell the rallies" thinking.
3)	Minneapolis spring wheat remains in an uptrend on its weekly charts, though cracks are starting to appear.	3)	Weather-wise there are no looming threats to the newly seeded winter wheat crop.

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 There are a number of analysts in the business talking about how the "smart money" is buying corn at this time, yet contracts seem to find their way to new lows every day. Granted there are bullish factors for corn, the most obvious being the already sizeable net-short futures position held by noncommercial traders, a slightly weaker carry in the December-to-March futures spread, and slowly firming national average basis. Regarding the latter two fundamental factors: Keep in mind that bin doors are likely locked up tight, and with futures consistently grinding to new lows merchandisers are starting to push spreads and basis to own supplies. But the bottom line remains commercial traders remain bearish long-term, with corn's forward curve bearish through July and national average basis versus the September 2018 futures contract well below average. Wednesday could see the market try to rally in response to lower trade early this week, and volume could actually pick up for a Wednesday. But it is unlikely corn suddenly turns bullish.

SOYBEANS Soybean contracts were able to erase most of Tuesday's sell-off overnight, with noncommercial short-covering leading the rally through early Wednesday morning. Jan soybeans moved below secondary (intermediate-term) support at $9.71 on its weekly chart, hitting a low of $9.67, before rallying. Still, momentum is toward the downside and with the January-to-March futures spread bearish Jan beans should test the support area between $9.61 and $9.49. Wednesday action could continue to show a slight recovery from the Monday and Tuesday sell-off, but support isn't likely to last. Even if it does, it will be difficult for the market to build much momentum given noncommercial traders still hold a net-long futures position and are looking to sell rallies rather than buy dips. Delivery of 157 contracts was reported against the November issue, putting the total at 1,120 contracts.

WHEAT The wheat complex was quietly mixed early Wednesday morning with winter contracts lower and Minneapolis spring showing a small gain. All three markets are showing a slight reversal from Tuesday's close. As for winter wheat, there isn't much news to provide direction. Weather is relatively benign for the newly seeded crop with farmers now anxiously awaiting January's round of reports for USDA to tell them how much they supposedly planted. (It's a crazy system, I know.) Minneapolis spring wheat remains in an uptrend on its weekly charts, though trade through the early part of this week has cracked the market's bullishness somewhat. Wednesday's session could see support slowly build if the U.S. dollar index stays under pressure in relation to the euro, as it did Tuesday.

DTN Cash	Change From	National	Contract	Change from
Commodity	Index	Prev Day	Avg. Basis	Month	Prev Day
Corn:	$2.99	-$0.04	-$0.39	Dec	$0.004
Soybeans:	$8.89	-$0.06	-$0.79	Jan	$0.006
SRW Wheat:	$3.95	$0.04	-$0.33	Dec	$0.004
HRW Wheat:	$3.72	$0.02	-$0.56	Dec	$0.013
HRS Wheat:	$6.01	-$0.04	-$0.28	Dec	$0.005

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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