DTN Before The Bell Grains

Row Crops Rebound Early Tuesday

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Monday's predominantly red commodity board has flipped to mostly green early Tuesday, helped by news that an agreement to prevent another government shutdown may be in the works. Among grain contracts, corn and soybeans are showing early support with help from lower soybean crop estimates for Brazil.

Other Markets:

Dow Jones: Higher
U.S. Dollar Index: Lower
Gold: Higher
Crude Oil: Higher

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Corn:

March corn is up 2 3/4 cents early Tuesday with help from a bullish change of heart in outside markets. Late Monday, CNBC.com reported Congressional negotiators are close to an agreement to keep the federal government open and may be able to disclose details by Wednesday. Although it is not clear if the President will approve, the news is helping U.S. stock futures trade higher and has restored more green color to Monday's commodity board. For corn in particular, U.S. export activity has been supportive to prices. On the bearish side, rain in this week's forecast for much of Brazil's crop areas and ongoing concerns about a lack of ethanol demand are two factors that have stalled cash prices near their highest level in eight months. The market is still waiting for old export sales data to be released, numbers that should be current by February 22, provided the federal government stays open. For now, the trend in cash corn remains up. DTN's National Corn Index closed at $3.44 Monday, down from its highest price in eight months and priced 28 cents below the March contract. Outside markets are mostly higher, while the March U.S. dollar index is down 0.12. At 8 a.m. USDA reported 122,376mt of corn sold to unknown destinations for delivery in 2018-2019.

Soybeans:

March soybeans are up 4 1/2 cents early Tuesday, also benefitting from a higher overall start for outside commodities and able to trim some of Monday's 9 1/2 cent loss. This week's trade talks are supposed to step it up a notch with Treasury Secretary Mnuchin and Trade Representative Lighthizer getting involved on Thursday and Friday, but it is still difficult to say how things are going. I hate to keep repeating the same news, but the truth is that all other market factors pale in comparison to how these talks turn out, so they will continue to earn their analytical space. Dow Jones offered some supportive news to soybean prices Monday, reporting the private firm, AgRural lowered its estimate of Brazil's soybean crop from 116.9 to 112.5 million metric tons (mmt) (4.1 bb). AgRural joins another private firm, INTL FCStone in suggesting Brazil's soybean harvest will be less than USDA's 117.0 mmt (4.3 bb) estimate. Early Tuesday, Brazil's CONAB lowered its soybean estimate from 118.8 to 115.3 mmt. USDA currently estimates Brazil's soybean exports will drop from 84.2 mmt their most recent season, to just 70 mmt (2.57 bb) in the current local season, giving the U.S. more room to compete the next twelve months. For now, the trend in cash soybeans is stalled sideways, below their highest prices in six months. DTN's National Soybean Index closed at $8.17 Monday, down from its highest level in six months and priced $0.88 below the January contract.

Wheat:

March K.C. wheat is down 1 1/4 cents early as small losses in all three wheats put them in the minority of Tuesday's commodities. Monday's gain in the U.S. dollar put the March contract near its contract high and comes at a time when U.S. exports of wheat have just started showing some interest from buyers. On Monday, USDA confirmed modest sales to Egypt and Nigeria and there should be more waiting in USDA's backlogged export data. However, wheat exports are still unlikely to reach USDA's 1.000 billion bushel estimate for 2018-19 and that is weighing on winter wheat prices. In the case of spring wheat, the Mar/May futures spread has shown sharply higher trade the past two sessions and is now trading at a bullish inverse -- a sign of bullish commercial demand for spring wheat. March Minneapolis prices however, are staying quietly sideways for now, below the January high of $4.80. At this time, the trends in cash HRW and HRS wheat are sideways, while the trend in cash SRW wheat remains up. DTN's National HRW index closed at $4.73 Monday, down from a five-month high and 23 cents below the March contract. DTN's National SRW index closed at $4.93 Monday, also down from a five-month high.

Todd Hultmancan be reached at todd.hultman@dtn.com

Follow Todd on Twitter @ToddHultman1

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Todd Hultman