DTN Before The Bell Grain Comments

Soybean Meal Keeps Pushing Higher

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

January soybean meal was up $3.30 at the morning break, still taking advantage of dry weather concerns in Argentina and lifting soybeans a few cents higher in the process. Corn was a little higher, finding early support from commercials near its lowest prices of the year.

Other Markets:

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

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Corn:

March corn was up 1 1/2 cents Wednesday, an early show of light commercial buying responding to corn's low prices. Overall however, corn prices remain depressed, weighed down by large U.S. supplies after five consecutive years of big harvests and are not responding yet to concerns of dry weather in Argentina the way that soybeans are. For contrarians, corn represents a textbook buying opportunity as spot prices are near their lowest level in eleven years and noncommercial traders are heavily net short. The one thing corn has not shown yet is some bullish reason to make noncommercials nervous about their short positions so commercial buying remains the primary source of support for now. Technically, the trend in March corn remains down, but downside risk should be limited. DTN's National Corn Index closed at $3.11 Tuesday, priced 42 cents below the March contract and down from its highest price in two months. Early Wednesday, 1,127 delivery intentions were assigned to December corn. In outside markets, the December U.S. dollar index is trading up 0.10 after RTTNews.com reported ADP as saying 190,000 private sector jobs were added in November, slightly more than expected.

Soybeans:

January soybeans were up 3 1/2 cents early Wednesday, continuing to find support from Argentina's dry weather concerns. The latest seven-day forecast remains mostly dry for Argentina and southern Brazil while central Brazil continues to receive beneficial showers. Because it is the southern equivalent of early June, it is still too early to say how the rest of the season will go, but Argentina's dry pattern seems likely to continue while La Nina conditions are in effect. The more bullish performance in this situation is coming from soybean meal where the January contract was up $3.30 at the morning break, just a few dollars away from its highest price in 2017. At 8 a.m. CST, USDA said the Nov. 30 sale announcement of 19.3 million bushels (525,000 mt) of U.S. soybeans to China for 2017-18 should have read 14.4 million bushels (393,000 mt) for 2017-18. Technically, January soybeans remain in a sideways trend, but have a chance to close above the October high of $10.13 later Wednesday. DTN's National Soybean Index closed at $9.35 Tuesday, priced 73 cents below the January contract and at its highest price in four months. Wednesday's delivery intentions for December contracts totaled 295 for soybean meal and 262 for soybean oil.

Wheat:

March Chicago wheat was down 1 1/4 cents early, still hovering near its lowest prices of the year with little reason to do otherwise. Early Wednesday, Statistics Canada estimate all wheat production just shy of 30.0 mmt, above USDA's 27.0 mmt estimate for Canada. Like corn, wheat prices are afflicted by a large hangover of supplies that have come from five consecutive years of big crops. Wheat plantings were down in the U.S. and Canada in 2017 and cash SRW wheat prices are up 11% from a year ago, but much of the bullish benefit of the lower plantings was nullified by larger crops from Europe and Russia. Looking ahead to 2018, all U.S. wheat plantings are likely to be roughly the same or a little lower than 2017 and so far, the southwestern U.S. Plains are on the dry side heading into winter. Technically, wheat prices remain under bearish pressure, but actually trading lower should remain difficult, thanks to commercial buying interest. DTN's National SRW index closed at $3.92 Tuesday, priced 41 cents below the March contract and holding above its August low while futures contracts make new lows. Among December contracts, there were 405 delivery intentions for Chicago wheat and 164 for K.C. wheat early Wednesday.

Todd Hultmancan be reached at todd.hultman@dtn.com

FollowTodd on Twitter @ToddHultman1

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Todd Hultman