DTN Before The Bell Grain Comments

Grains May Rise Off Short-Term Low

Elaine Kub
By  Elaine Kub , Contributing Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Corn 3/4 lower. Soybeans 3/4 higher. Wheat 3/4 higher. Bearishness about global economic health counteracts the bullish influence of a weaker dollar. The grain markets, especially wheat, have tried to bounce this week during a collapse in the U.S. Dollar Index. However, the overall bearishness about global economic health may put these markets in danger of lower prices Thursday.

Other Markets:

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

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Corn:

Gold futures have worked back above $1,200 per ounce, and the U.S. Dollar Index continues to nosedive now that investors have stronger confidence there will not be another interest rate rise from the Fed in the near future. The grain markets in general, and the corn market in particular, which is sensitive to U.S. export prospects in a year with ever-increasing South American corn crop projections, have not yet reacted much to the weaker dollar. Indeed, the weekly export sales report was disappointing for U.S. corn Thursday morning. Nevertheless, an inside trading range overnight and a two-day bounce in the wheat futures market might hint at a near-term bottom for the grains within a longer-term sideways pattern. The DTN National Corn Index, an average of cash bids around the country, was $3.37 Wednesday, showing the national average basis level remained steady at 23 cents under the March futures contract. At 8 a.m. USDA announced 152,400mt of corn sold to unknown for delivery in 2015-2016.

Soybeans:

Soybean export sales for the 2015-16 marketing year came in at 666,800 metric tons in Thursday morning's weekly report, better than last week and a performance that roughly matched expectations. That may forestall one source of potential market bearishness for the day. To the extent that fundamental traders may still be looking back at the implications of Tuesday's Supply and Demand Estimates, they may believe the bearishness of an increased inventory projection has already been priced in, and the market can now recover within its long-term sideways trading pattern. With the November soybean futures contract trading at $8.80 per bushel and the December corn contract trading at $3.83, the new crop soy-to-corn price ratio is at a rather low 2.29-to-1 (unfavorable to soybeans). This is especially relevant while reference prices for crop insurance policies are being averaged through the month of February. The DTN National Soybean Index was $8.14 Wednesday afternoon, showing the U.S. average basis level remained steady at 48 cents under the March futures contract.

Wheat:

Wheat traders may start to put more confidence in the weather forecasts that look out as far as the spring thaw, when the northern hemisphere's winter wheat will break its dormancy. In the U.S. Plains, there are some concerns about early warmth and dryness, but nothing extraordinary yet. In Ukraine and other Black Sea locations, there are also some concerns about an early loss of snow cover. Futures prices were as much as 5 cents higher overnight for hard wheat classes. But the wheat market's recent bounce may be in danger Thursday, due to overall commodity market bearishness about global economic health. The DTN National Soft Red Wheat Index closed at $4.20 Wednesday, demonstrating that the market for milling-quality low protein wheat continues to demand a supply-constrained premium over the HRW Index at $3.88. The DTN Spring Wheat Index was $4.61 Wednesday, with a national average basis level at 25 cents under the March Minneapolis contract.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter: @elainekub

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Elaine Kub