DTN Closing Grain Comments

Corn and Wheat Sag, Soybeans Close a Penny Higher

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

General Comments:

March corn settled down 1 3/4 cents per bushel, while December corn was down 1 1/2 cents. March soybeans closed up 1 cent, with new crop Nov beans up just 1/4 cent. Chicago March wheat settled down 4 1/2 cents, Kansas City March was down 3 1/2 cents and Minneapolis March wheat finished down 1/2 cent per bushel. Wheat closed lower for the first time in six trading days.

The U.S. dollar index is up .5270 at 96.63. February gold is down $5.40 at $1278.60. March silver was down $.090 at $15.290. The Dow Jones average is down 88 points at 24,488. March crude oil is up 53 cents at $53.15 per barrel. March RBOB is at $1.4058, up .0041. March heating oil is down $.0023 at $1.8811.

Corn:

In very quiet and low volume trade, corn continues to trade in a choppy pattern, currently right at the uptrend line. While export demand activity remains solid, and U.S. corn has been one of the cheapest feed grains in the world, there is little else to drive this market on this Thursday. Ethanol production was reported to be down 20,000 barrels per day (down 1.9%) at 1.031 million, while stocks increased slightly. Corn used for ethanol last week was 106.4 million bushels, while we need a weekly average of 107.5 million to reach projections. Some analysts feel that the USDA may be overstating corn usage for ethanol by as much as 50 million bushels. There is no confirmation of constant rumors of China buying U.S. corn or its by-products as the government shutdown continues. A close below trend line support would likely send March to the next support level of $3.70 to $3.72. Comments from Commerce Secretary Wilbur Ross did not provide much support on Thursday, suggesting that the U.S. and China are "miles and miles apart" from a solution to trade issues. Corn futures look to continue to trade in a sideways pattern in the absence of demand news. Weather in Brazil could become a more important factor a few weeks down the road, but in the meantime, total South American corn production is pegged at some 25 to 26 million metric tons (mmt) above last year. DTN's national corn Index closed at $3.47 on Wednesday and reflects an average basis of 32 cents under March.

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Soybeans:

As in corn, soybeans continue to trade in a choppy and sideways trend, with many looking at the developing wedge, or triangle pattern, on soybeans at some point leading to a break out. The extremes of that triangle pattern are bounded by $9.22 to $9.25 on the upside, and $8.92 to $8.94 on the downside on March. While wheat and corn appear to be gaining some new export business in the last few weeks, the soybean basis at both major U.S. ports has suggested slack U.S. soy demand. News that soybeans from Brazil land in China at roughly an $8/mt discount to U.S. for February would argue that there has been no additional Chinese business beyond the 5 mmt that most feel was transacted. A cash-connected commission house has indicated that China may have bought up to 1.5 mmt (55.1 million bushels) of Brazilian soybeans in the past week at a 30-cent per bushel discount to U.S. China's soybean imports for January through December 2018 are being called 88 mmt, down some 7.85% from the previous year, likely impacted by the growing African swine fever epidemic. The next trade meeting will begin in just six days, where 30 Chinese representatives are expected to meet with U.S. officials. Any results will be closely watched, but Wilbur Ross' statements above would suggest that we not be too optimistic. Weather will continue to impact soy price in coming weeks, as the hot and dry pattern looks to extend another few weeks in north central Brazil, and the eastern half of Brazil turns hot and dry again after weekend showers. A continued mostly bullish outlook is advised regarding Brazilian weather. A poll by a major news organization pegs Brazil soy production at 117 mmt, and most are in a range of 115 to 118 mmt, down from last year's 119.8 mmt. DTN's National Soybean Index closed at $8.24 on Wednesday and is priced $0.91 below the March futures contract.

Wheat:

For the first time in a week, wheat futures are taking a break from the upward trajectory. Nothing has changed. In fact, Russian wheat values are said to have hit a seasonal high, with export prices near $248 per metric ton, and that compares to $215/mt in September. Rosstat came out with on-farm Russian wheat stocks sharply lower than last year at this time, and a major analytical firm sees February 1 Russian wheat stocks down 30% versus last year. With Black Sea and EU wheat stocks in tightening mode, and U.S. HRW said to be the world's cheapest hard wheat along with Argentina, the thought is we could see more export demand shift back to the U.S. Of course, each time the market thinks this, Russia seems to reappear with a large sale. Turkey and Ethiopia are both in for 300,000 mt and 400,000 mt respectively, and we'll see who gets this business. Turkey will usually source from the Black Sea. Also underpinning the wheat futures market is the incoming brutal cold wave for the U.S., with below zero readings in some key wheat areas. The biggest threat appears to be from Tuesday night to Thursday, with uncovered wheat susceptible to some winterkill damage. On the bearish side, the International Grains Council raised world wheat production to 737 mmt from 729 mmt previously. DTN's National HRW index closed at $4.91 on Wednesday, and that is an average basis of 24 cents under Kansas City March futures, firmer.

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

Follow Dana on Twitter @mantini_r

(CZ)

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Dana Mantini