DTN Early Word Grains

Wheat is Leaving 'Em in the Dust

6:00 a.m. CME Globex:

March corn was 1 cent higher, March soybeans were 1 cent higher, and July Kansas City (HRW) wheat was 10 cents higher.

CME Globex Recap:

Kansas City wheat posted a strong double-digit gain overnight, far outdistancing gains seen over the rest of the grain and oilseed complex. Chicago wheat was 6 cents higher and Minneapolis spring 4 cents higher, while corn and soybeans both gained a penny. Most other commodities were lower early Tuesday morning despite a slightly weaker U.S. dollar. DJIA futures were showing a triple-digit loss following the sharp sell-off by the Big Board Monday.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 177.23 points (0.7%) lower at 26,439.48, the NASDAQ Composite lost 39.27 points (0.5%) to 7,466.51, and the S&P 500 fell 19.34 points (0.7%) to 2,853.53 Monday. DJIA futures were 172 points lower early Tuesday morning. Asian markets closed lower with Japan's Nikkei 225 down 337.37 points (1.4%), Hong Kong's Hang Seng falling 359.60 points (1.1%), and China's Shanghai Composite off 34.99 points (1.0%). European markets were trading lower with London's FTSE 100 down 39.34 points (0.5%), Germany's DAX losing 64.29 points (0.5%), and France's CAC 40 off 16.27 points (0.3%). The euro was 0.0027 higher at 1.2409 as the U.S. dollar index dropped 0.20 to 89.14. March 30-year T-Bonds were 3/32 higher at 148'07 while February gold added $3.70 to $1,344.00. Crude oil was $0.51 lower at $65.05 and Brent crude lost $0.24 to $69.22. China's Dalian soybean futures were mixed and Malaysian palm oil futures were lower overnight.

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BULL BEAR
1)

Light commercial buying has been providing support to corn's rally of late, with the carry in the March-to-May spread nearing a neutral level.

1) Corn contracts are in short-term overbought technical situations.
2) South American weather concerns could keep noncommercial traders buying in soybeans another day. 2) Both old-crop March and new-crop November soybeans remain in short-term downtrends on their respective daily charts.
3) The July Kansas City wheat contract continues to extend its secondary uptrend on concerns over weather and potential crop conditions. 3) The most bearish thing about winter wheat markets continues to be the strong carry in forward curves.

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 The corn market was higher again early Tuesday, with the nearby March contract approaching a possible short-term bearish turn. The contract is testing support at its previous high of $3.60 1/2 (from December 4) while daily stochastics (short-term momentum study) have climbed above the overbought mark of 80%. However, given that it's Tuesday, and the CFTC Commitment of Traders report this coming Friday will show positions as of today's close, another session of noncommercial short-covering is possible. Also, keep an eye on the March-to-May futures spread as it has stabilized with its carry between 7 3/4 cents and 8 cents. Both cover a bearish level of calculated full commercial carry, but a bullish breakout (carry weakening beyond 7 3/4 cents) could move the nearby spread to a neutral level. If this happens it would provide more ammunition for a continued short-covering led rally.

SOYBEANS Despite Monday's rally both old-crop March and new-crop November soybeans remain in minor (short-term) downtrends on daily charts. Keep in mind though that chart patterns can be trumped by longer-term chart signals, making those seen on daily charts less reliable than those on weekly and monthly charts. Still, it would not be a surprise if soybeans lose their overnight bullish momentum during Tuesday's session, of if not Tuesday than Wednesday. Initial support for the March contract is at Friday's low of $9.83 3/4 and resistance Thursday's high of $10.02. The March-to-May futures spread remains in a solid downtrend (strengthening carry, more bearish fundamentals), though this trend has stabilized short-term between 11 1/4 cents and 11 1/2 cents on its weekly close-only chart. On the other hand, the May-to-July at a 9 1/2-cent carry continues to reflect a more neutral market view of supply and demand longer-term.

WHEAT The story in wheat continues to be new-crop Kansas City July. Spurred by continued dry, windy conditions over much of the U.S. Southern Plains HRW growing area the contract easily blew through projected technical resistance near $4.38 1/2 on its weekly chart. This price marked the 23.6% retracement level, one that wasn't really expected to slow the rally much, with the 38.2% mark up at $5.10. Weekly stochastics (intermediate-term momentum study) remain bullish and below the overbought level of 80%. Crop condition is a growing concern as winter nears its 2/3 completion point at the end of January. Key to the rally will be if the Kansas City July-to-September carry starts to weaken again, signaling increased commercial buying, with resistance on its weekly close-only chart at 14 1/2 cents.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.27 $0.02 -$0.32 Mar -$0.001
Soybeans: $9.23 $0.06 -$0.68 Mar $0.002
SRW Wheat: $4.19 $0.08 -$0.30 Mar -$0.001
HRW Wheat: $4.13 $0.10 -$0.40 Mar $0.000
HRS Wheat: $5.96 -$0.01 -$0.18 Mar -$0.006

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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