DTN Closing Grain Comments

Corn Mixed in Choppy Trade; Wheat, Soybeans Show Solid Gains

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

General Comments:

March corn settled down 1/4 cents per bushel, while December corn was up 1 1/2 cents. March soybeans closed up 5 3/4 cents, with new crop Nov beans up 6 cents. Chicago March wheat settled up 4 3/4 cents, Kansas City March was up 5 1/4 cents, and Minneapolis March wheat, finished up just 2 1/2 cents per bushel. The U.S. dollar index is down .2060 at 96.094. February gold is down $.40 at $1283. March silver was up .055 at $15.38. The Dow Jones average is up 121 points at 24,525. March crude oil is down 69 cents at $52.32 per barrel. March RBOB is 1.3937, down .0221. March heating oil is down .0177 at $1.8760.

Corn:

Corn finished mixed in slow, two-sided trade. Although CIF values at the Gulf firmer Wednesday, the strength is more attributed to the colder, icier weather and logistics than demand. Corn shipments continue to run at a pace that is sharply above last year and U.S. corn is very competitive to the world. But, in the absence of USDA reporting, we are running blind with respect to new sales. Argentina's 65,000 mt sale of corn to Taiwan on Tuesday at values some 5 cents per bushel less than the U.S. shows South America will be the primary competition in coming months. Safrinha (second or winter crop)corn in Brazil is now 12% planted -- well ahead of last year's 2% pace. For that crop, which is said to comprise some 70% of Brazil corn production, it is weather in April that will be key as pollination occurs. Weather during planting will begin to have a bullish price impact should the recent Brazilian hot and dry pattern extend. Argentine corn production appears to be on the upswing, with several 44 mmt to 44.5 mmt estimates lately versus the USDA's 42.5 mmt in the last report. Rumors have been constant with the latest that China would buy some U.S. corn and wheat on a goodwill gesture ahead of the Jan. 30 trade meeting between China's President Xi Jinping, and President Donald Trump. Weak ethanol margins and a better conversion rate than in the past have slowed ethanol production and some private analysts call for U.S. corn usage for ethanol to be overstated by as much as 50 million bushels. There has been no mention recently of China purchases of either pork or ethanol, which would surely give corn a nice boost. The funds appear to be sticking with a modest net-long corn position, estimated to be 50,000 to 55,000 contracts, including options. Look for key support at $3.76 to $3.77 on March to continue to be challenged. DTN's National Corn Index closed at 3.47 on Tuesday, and reflects an average basis of 32 under March.

Soybeans:

Soybean futures trade continues to be a whipsaw affair, with gains on Friday nearly wiped out Tuesday, followed by Wednesday's modest 5 3/4 cent gain, making the net of the past three days just a few cents higher. Soybeans continue to be most sensitive to any China rumors, and Tuesday's rumor was bearish on trade problems, later proven wrong. Although soybeans, we know, were bought by China ahead of the 4-week government shutdown, in the absence of export sales reports, we trade on only speculation now. Beyond the widely assumed purchase of 5 mmt (180 million bushels) of U.S. soybeans, cash markets would not suggest additional buying. CIF barge values are up 5 to 6 cents Wednesday, but that is more a function of weather-related barge freight gains, rather than demand. PNW bids have yet to surface out to May. The well-advertised hot and dry pattern in central and northeast Brazil continues bullish for soybeans as it saps yield potential and forces private estimates to drop in unison. Early yields from Brazil's soy harvest are said to be disappointing, but improving. The majority of Brazil production estimates appear to be in the 115 mmt to 119 mmt range, with the low end some 4.8 mmt below last year's record. Aside from slack cash demand of late, another headwind for soybeans has been the current soybean vs. corn ratio at 2.37%, hardly discouraging additional bean acres. I saw one estimate that soy acres could be up 3.4 million, nearly assuring another 1-billion-bushels-plus ending stocks number. The jury is still out on that of course. Soybean oil strength has been a supporting factor for soybeans, as sharply increased domestic soy oil usage, and expectations that India would increase veg oil imports by 5%, including an increase of 9% in palm oil, have fueled recent gains. March soybeans must stay above the $8.91 to $8.93 area on a closing basis or risk breaking down. The market will continue to trade on rumors and weather until we see the renewal of export sales information. DTN's National Soybean Index closed at $8.18 on Tuesday and is $0.91 below the March futures contract.

Wheat:

Wheat continues to be the star of the grains, as Wednesday's higher close, some 20 cents above the recent low in Kansas City, is the fifth straight day of higher prices. Rumors at midday Tuesday of China's intention to buy up to 7 million metric tons of U.S. wheat as a goodwill gesture permeated the market. Wheat was already rallying from late last week on solid indications that some HRW had been sold to private Egyptian buyers, and on steadily rising Russian wheat values (at 4-year highs), suggesting tightening supplies there. Both spot wheat spreads and the Gulf basis have been improving, hinting at the above-mentioned demand as U.S. wheat has been very competitive in the world, said to be some $10 per metric ton cheaper than Russian wheat on a FOB basis. There are a host of wheat tenders around, with Turkey seeking 300,000 mt, Jordan back in for 120,000 mt, Bangladesh in for 50,000 mt, and ideas that Algeria may also be looking at U.S. wheat supporting values. Tunisia also is said to have bought 100,000 mt of soft wheat. Also being watched is the upcoming brutal cold wave, expected to see freezing as far south as the Delta and a cold snap the coldest in years. The threat of winterkill for unprotected wheat is supportive. Although the wheat is on a pretty good run, there remains very solid resistance not far above Wednesday's values. DTN's National HRW Index closed at $4.85 on Tuesday, and that is an average basis of 25 under Kansas City March futures.

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

Follow Dana on Twitter @mantini_r

(CZ)

Dana Mantini