DTN Closing Grain Comments

General Comments:

March corn closed up 1/2 cent per bushel and December corn was up 1/2 cent. March soybeans closed down 1 cent and November soybeans were down 1 1/4 cents. March K.C. wheat closed up 2 cents, March Chicago wheat was up 2 1/4 cents and March Minneapolis wheat was up 2 1/2 cents. The March U.S. dollar index is trading up 0.427 at 96.930. The Dow Jones Industrial Average is up 95.19 points at 25,520.95. April gold is down $2.20 at $1,311.80, March silver is down $0.11 at $15.58 and March copper is up $0.0035 at $2.7755. March crude oil is up $0.89 at $53.99, March heating oil is up $0.0329, March RBOB is up $0.0390 and March natural gas is down $0.099.

Corn:

Corn is right back to where it was the day before the USDA report, and the March contract is still mired in a $3.73 to $3.83 range. Surging basis both at the Gulf and PNW is bullish, partly due to much higher freight costs, but also rumors of China interest in U.S. corn. Overall demand for U.S. corn remains strong, with both South Korea and Mexico said to be actively shopping. South Korea purchased 138,000 mt and 65,000 mt of corn on Tuesday. Very poor weather in the PNW and Northern Plains has stifled logistics and firmed basis. Rail values at the PNW have gone up 10 to 20 cents per bushel over the past few weeks. There is more talk of the EPA suggestion to move to year-round E-15 sales ahead of the summer driving season, leading to an uptick in domestic corn usage for ethanol. Ethanol production for the week ended Feb. 8 surged to 1.029 million barrels per day, or up 6.4% versus last week, while ethanol stocks dropped 2% from a week ago. The weekly increase in production was the largest in 13 months. Corn used for ethanol improved to 106.23 million bushels last week, but needs to average over 107 million weekly to reach USDA's estimate. Weather in Brazil has turned more bearish, with widespread soil moisture improvement likely over the next several weeks for the safrinha corn crop. On the CFTC report released Tuesday, as of Jan. 15 funds were shedding themselves of a once large net-long position. It is estimated the funds are now net short a very modest 15,000 contracts, including options. March corn needs a rally over $3.83, and Dec corn over $4.05 to break us out of this still sideways and coiling range. DTN's National Corn Index closed at 3.50 on Tuesday, and reflects an average basis of 28 under March.

Soybeans:

As in corn, March soybeans are also right about where we were the day prior to the USDA report. Tuesday's sharp rally was fueled by renewed optimism that the U.S. and China would be able to reach a deal to at least extend trade talks and delay the imposition of additional tariffs. President Xi Jinping joins the primary trade representatives from the U.S. on Friday, with presidents Trump and Xi Jinping expected to meet again in March. Also supporting soybeans on Tuesday was the latest crop estimate for Brazil soy production by well-respected CONAB -- the Brazil supply and statistical agency. That forecast fell to 115.3 mmt from 118.8 mmt previously and figured roughly 5 mmt (184 million bushels) below the record large production last year. The 115.3 mmt would still be the second largest ever Brazil soy production. Even with that sharp drop, when looking at Argentina possibly harvesting over 17 million metric tons more than last year, and the U.S. having the largest ever stocks of soybeans, there is little to get excited about. Also, the new-crop soybean/corn ratio at 2.38 favors additional soy planting -- something we don't need. It is interesting to note that in the past two years, CONAB has underestimated Brazilian production by 5% to 7% in February. Brazil's soy harvest was 26% complete as of the weekend, and well ahead of last year (10%) and the 5-year average pace of 12%. Weather has taken a turn for the better in Brazil, with the wetter forecast likely aiding late-planted beans, as well as the second corn crop. DTN's National Soybean Index closed at $8.30 on Tuesday, 89 cents below the March futures contract.

Wheat:

All three wheat markets finished slightly higher, following Minneapolis' lead as basis continues to rise there. Wednesday's wheat strength is in spite of the U.S. dollar index nearing its old high. More heavy snows and cold weather are expected to hit both the PNW and Northern Plains, likely resulting in more logistics problems and higher freight costs. There are a host of wheat tenders around, and the recent plunge in ocean freight rates may make U.S. wheat more competitive into North Africa. Tunisia, Algeria, Ethiopia and Bangladesh are all tendering for wheat. Although it is rare to see a "quadruple bottom," Chicago July wheat has now bounced four times off the $5.17 level, and rallied 9 1/2 cents above that. Theoretically, Wednesday's higher close would give a buy signal on Japanese candlesticks for Chicago July. Weather in the U.S. will feature snows in the west and rain and snow in the east, but uncovered wheat in parts of Nebraska and Kansas could face winterkill threats in the coming week. Kansas City is the only wheat market remaining below key moving averages, and has been the weakest as speculators have reversed long KC/short Chicago wheat spreads. DTN's National HRW Index closed at $4.71 on Monday, and that is an average basis of 21 under Kansas City March futures.

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

Follow him on Twitter @mantini_r

(CZ)

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