DTN Early Word Grains

Markets See Technical Sell-Off

6:00 a.m. CME Globex:

July corn was 1 cent lower, July soybeans were 1 cent higher, and July Kansas City (HRW) wheat was 9 cents lower.

CME Globex Recap:

The overnight sell-off into Monday morning by the grain and oilseed complex looked to be technical in nature, too early to tell if actual commercial pressure has developed. Kansas City wheat led the way, with a sharp double-digit break tied to a change in weather over parts of the U.S. Southern Plains. Corn and soybeans didn't do much overnight. The energy complex was lower, while metals were mixed. The triple-digit rally in DJIA futures point to another volatile day ahead while the U.S. dollar index was unable to hold initial gains.


The Dow Jones Industrial Average closed 122.91 points (0.5%) lower at 24,360.14, the NASDAQ Composite lost 33.60 points (0.5%) to 7,106.65, and the S&P 500 fell 7.69 points (0.3%) to 2,656.30 Friday. DJIA futures were 150 points higher early Monday morning. Asian markets closed mixed with Japan's Nikkei 225 up 56.79 points (0.3%), Hong Kong's Hang Seng down 492.79 points and China's Shanghai Composite losing 48.40 points (1.5%). European markets were trading mixed with London's FTSE 100 down 28.16 points (0.4%), Germany's DAX gaining 22.26 points (0.2%), and France's CAC 40 up 0.10 point. The euro was 0.0029 higher at 1.2360 while the U.S. dollar index fell 0.19 to 89.58. June 30-year T-Bonds were 21/32 lower at 144'24 while June gold slipped $0.80 to $1,347.10. Crude oil was $0.95 lower at $66.44 as Brent crude dropped $1.06 to $71.52. China's Dalian soybean and Malaysian palm oil futures were both lower overnight.

1) Weekly export inspections of corn could be large again later Monday morning, but not expected to be as large as the previous week's number. 1) The DTN National Corn Index (NCI, national average cash price) is nearing a sell-signal on its daily chart.
2) July soybeans still look to be in the late stages of a minor (short-term) uptrend on its daily chart. 2) July soybeans could soon follow a similar path as July corn if it moves into a minor (short-term) downtrend on its daily chart.
3) Weather remains generally bullish for spring wheat. 3) The change in weather is perceived to be bearish Kansas City wheat, with next short-term support for new-crop July at $5.00.

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CORN While it looks like old-crop corn futures, in this case July, have established a minor (short-term) downtrend on its daily chart, it needs to be remembered that we've seen this show before. Still, the overnight session saw the contract continue a series of new 4-day lows, an indication that momentum is getting more bearish. As always, keep an eye on futures spreads as the day progresses. Though overnight trade saw a stronger carry in both the old-crop and new-crop forward curves, some of this could be due to low volume trade. Last week saw national average basis firm by about a penny (DTN National Corn Index minus the July futures contract). However, the NCI is nearing what has been in the past an important bearish technical signal on its daily chart, a signal that could be established when the index is calculated Monday evening.

SOYBEANS By the time I was done writing corn analysis and started on soybeans, the market had moved from fractionally lower to higher. This had been the pattern back to the open of the overnight session with soybeans not wanting to move lower, but unable to sustain short bursts of buying interest once above unchanged from Friday. Technically, short-term, the July contract looks to be slightly more bullish than its corn counterpart with daily stochastics not yet establishing a bearish crossover above the overbought level of 80%. Fundamentally the question remains Argentine production, and what that country's weather diminished crop ultimately means regarding demand for U.S. supplies. Last week saw a string of announcements of new export sales broken Friday, but could resume again Monday morning. Futures spreads remain interesting with the carry in the May-to-July bearish and the inverse in the July-to-August bullish.

WHEAT Someone somewhere believes that the change in weather across the U.S. Southern Plains has been, or will be, enough to save the HRW wheat crop. While parts of the growing area did receive precipitation in some form over the past weekend, and forecast to get more this coming week, the crop has also seen recent spikes to record high mixed in with drops to sub-freezing. The most frequently asked question at this time is how much of the crop is left in the field to kill? Meanwhile, the Northern Plains of the U.S. and Canada continue to deal with the latest spring blizzard, delaying in the U.S. early planting of what was expected to be more spring wheat acres. Yet the new-crop Minneapolis September contract was also lower overnight, testing short-term technical support at $6.24 1/2 on its daily chart.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.52 -$0.02 -$0.34 May $0.007
Soybeans: $9.83 -$0.06 -$0.71 May $0.006
SRW Wheat: $4.41 -$0.09 -$0.32 May -$0.003
HRW Wheat: $4.56 -$0.12 -$0.39 May $0.002
HRS Wheat: $6.06 -$0.05 -$0.11 May $0.005

Darin Newsom can be reached at darin.newsom@dtn.com

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