DTN Closing Grain Comments

Corn and Soybeans Continue Firm Awaiting China Action, Wheat Sags

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN illustration by Nick Scalise)

General Comments:

March corn settled down 1/2 cent per bushel, while July corn was down 3/4. January soybeans closed up 1 3/4 cents, with July up 1 1/2 cents. Chicago March wheat was down 4 1/2 cents, Kansas City March down 7 1/4, and Minneapolis March wheat was off4 3/4 cents. There were more HRW deliveries with ADM putting the receipts out. The December U.S. dollar index is up .062 at 97.02. February gold is down $4.90 at $1,241.70. March silver was down .09 at $14.55. The stock markets were closed for the National Day of Mourning. January crude oil is down 27 cents at $52.98 per barrel. January RBOB is $1.4489 up $0.0055. January heating oil is down $0.0095 at $1.8913.

Corn:

The corn market continues to keep hope alive on the China pledge from the G-20, as March corn, trading both sides of unchanged, slipped near the close to finish down 1/2 cent. However, the Sunday night gap higher opening remains intact as the trade waits for some good news from China. Rumors from not only Chinese web sites, but also U.S. commission houses are rampant about some large purchases by China ahead. If they are to be believed, the purchases would include some corn and ethanol as well as soybeans. So far, although the corn basis is firmer Wednesday at many locations, there is no indication that any purchases have been made. Some feel that a return to China by President Xi Jinping on Thursday, and the conclusion of the President Bush funeral, may lead to some positive announcement. Due to the National Day of Mourning, several reports will be delayed, including export sales to Friday and CFTC's COT report on Monday. We are coming up to a Moore Research seasonal on corn -- buy March corn on 12/19, and exit on 1/11. That has been a winner for 13 of the last 15 years. Funds, who have covered much corn, are likely short slightly on a combined futures and options position. March corn DTN's National Corn Index settled at $3.47 Tuesday and is priced 37 cents below the March contract.

Soybeans:

Soybeans continue to also be in a holding pattern, awaiting some good news from China on buying U.S. soybeans. The breakout was tested again and the market remains above the Sunday night gap. China web sites talked about a purchase of 8 million metric tons (mmt) ahead, which would be 294 million bushels. Many in the trade feel that Sinograin could purchase a minimum of 5 mmts. So far, the U.S basis remains weak on soybeans, but the Brazilian basis continues to slide, and for December, is now said to be 90 cents per bushel over nearby futures, having fallen from $2.60 over just a month ago. That to some, is a sign that Chinese soy buying has slowed from Brazil, and that they may be preparing to buy from the U.S. The Brazilian soy crop continues to grow without an impending weather issue, with some private estimates ranging from 122 mmt to as high as 130 mmt, each of which would be an all-time record production. Celeres indicated that Brazil could get to 130 million metric tons. Producers should be locked and loaded to reward the rally should China come into buy, as both the U.S. and Brazil fundamentals remain overall bearish. DTN's National soybean Index closed at $8.24 Tuesday and is priced $0.88 below the January contract.

Wheat:

What is wrong with the wheat market? Several factors may have converged to send wheat to lower levels again, with Chicago and Kansas City March down 11 cents to 13 cents from the Sunday night highs, and now below the pre-G-20 price levels. In addition to unwanted large deliveries in Kansas City, news from Egypt that they would be delaying opening letters of credit on as much as 945,000 metric tons of wheat until January pressured the market. The re-opening of the Azov Sea shipping path in Ukraine was also a bearish factor along with a much wetter forecast ahead for drought-impacted European and Black Sea wheat areas. There is one glimmer of hope, at least according to some in China, with rumors that China could buy as much as 7 million metric tons of U.S. wheat. I'm not sure anyone expected or even believes that. Apparently, the market did not Wednesday. Kansas City March needs to stay above that $4.94 to $4.95 area on a close or risk heading to new lows. DTN's National HRW index closed at $4.69 Tuesday, and that is an average basis of 36 cents under Kansas City March futures.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow him on Twitter @mantini_r

(CZ)

Dana Mantini