DTN Before The Bell Grain Comments

Grains Lightly Green the Morning After

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

Morning CME Globex Update:

The morning after USDA released its latest supply and demand estimates for grains, corn, soybeans, and wheat were all trading a little higher for no specific reasons. Grains were offered a little help from Wednesday's lower U.S. dollar after the Labor Department said the core rate of consumer prices was only up 1.7% from a year ago.

Other Markets:

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

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Corn:

March corn was up 1 1/4 cents early Wednesday, staying quiet near its lowest spot prices in eleven years after USDA slightly reduced its estimate of U.S. ending corn stocks to 2.437 billion bushels on Tuesday. Wednesday's weather map shows windy conditions in the northern Midwest with snow from Minnesota to the Great Lakes. The Corn Belt is drier elsewhere for anyone wanting to transport grain. This week's forecast for South America still looks mostly dry for southern Brazil, but has some rain in store for Argentina where crops will benefit from any moisture. Overall, the trend remains down in March corn with U.S. exports still losing business to this year's larger crop in South America. The only bullish hope at the moment is that new lows are not being made easily and that may make bearish noncommercial traders a little nervous. DTN's National Corn Index closed at $3.08 Tuesday, priced 40 cents below the March contract and down from its highest price in two months. Early Wednesday, there were 266 delivery intentions in December corn. In outside markets, the December U.S. dollar index is down 0.19 after the U.S. Labor Department said core consumer prices were up 1.7% from a year ago, less than expected. The Federal Reserve will make its next announcement on interest rates later Wednesday.

Soybeans:

January soybeans were up 4 cents early, taking back part of Tuesday's loss after USDA reduced the export estimate by 25 million bushels. The adjustment confirmed the slower-than-expected export pace that we had been seeing for weeks and is likely related to the increased rainfall that Brazil has seen since early November. Argentina is still on the dry side, but has some helpful rain in this week's forecast. Traders are also apt to remember that the U.S. had big yields in 2017 in spite of its dry weather. This early in the new crop season, the temptation is to over-analyze what little we know, but the deciding factor will be South America's weather in the days ahead as crops develop. For now, La Nina remains a factor of bullish concern, but crops have not yet been seriously impacted. The trend in January soybeans remains sideways with important support at the November low of $9.67. DTN's National Soybean Index closed at $9.04 Tuesday, priced 72 cents below the January contract and down from its highest price in four months. Wednesday's delivery intentions for December contracts totaled 110 for soybean meal and 79 for soybean oil.

Wheat:

March Chicago wheat was up 2 1/4 cents early Wednesday, ignoring USDA's higher ending stocks estimate of 960 million bushels as USDA's latest estimate just erased an export increase in November that never did make sense. Last week's higher wheat crop estimate from Canada showed up in Tuesday's WASDE estimates and pushed world production to a new record high of 755 mmt or 27.75 billion bushels. In other words, the lowest U.S. wheat planting on record lost out to increased crops in Russia and Europe and it looks like the U.S. will still have to carry nearly a billion bushels of wheat into the next season. The only good news for wheat in this situation is that the bearish news above is old news and only explains why wheat prices are at their lowest spot prices in eleven years. The future is wide open with noncommercial traders likely adding to short positions at these new lows. DTN's National SRW index closed at $3.72 Tuesday, priced 38 cents below the March contract and at its lowest price in seven months. Among December contracts, there were 206 delivery intentions for Chicago wheat, 18 for K.C. wheat, and 83 for Minneapolis wheat early Monday. December grain futures expire early on Dec. 14.

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

FollowTodd on Twitter @ToddHultman1

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Todd Hultman