DTN Closing Grain Comments 12/12 14:02
A Bullish Surprise in Wheat
March KC wheat has been quietly sideways for almost two months, but rallied
12 cents on Thursday's close with no obvious bullish explanation for the move.
On a day when President Trump and several media sources are suggesting a
limited trade agreement with China is near, January soybeans were up 4 3/4
cents and March corn was up 6 1/2 cents.
By Todd Hultman
DTN Lead Analyst
March corn closed up 6 1/2 cents and July corn closed up 6 1/4 cents.
January soybeans closed up 4 3/4 cents and July soybeans were up 3 3/4 cents.
March KC wheat closed up 12 cents, March Chicago wheat was up 11 cents and
March Minneapolis wheat was up 4 3/4 cents. The December U.S. dollar index is
trading up .37 at 97.43. The Dow Jones Industrial Average is up 209.26 points
at 28,120.56. February gold is down $2.50 at $1,472.50, March silver is up
$0.12 at $16.97 and March copper is up $0.0165. January crude oil is up $0.51
at $59.27, January heating oil is up $0.0252, January RBOB gasoline is up
$0.0070 and January natural gas is up $0.089.
March corn closed up 6 1/2 cents at $3.77 3/4 Thursday, helped by bullish
export news and a tweet from President Donald Trump which said, "Getting VERY
close to a BIG DEAL with China." As DTN comments have previously pointed out, a
recent boost in Brazilian corn prices has put export pricing back in favor of
the U.S. and we finally saw evidence of that transition happening Thursday.
Earlier, USDA said 34.4 million bushels (mb) of corn were sold last week, a
higher amount from the previous week thanks to the top buyers of Mexico and
Japan. Corn shipments still lagged at 20.9 mb and total shipments are down 56%
in 2019-20 from a year ago. USDA later announced 42.3 mb (1,074,420 mt) of U.S.
corn were sold to Mexico and 4.4 mb (110,744 mt) were sold to unknown
destinations, both for 2019-20; 20.7 mb (525,780 mt) of corn were sold to
Mexico for 2020-21. Thursday's weather map shows snow in Wisconsin, but is
mostly clear for the rest of the Corn Belt. The seven-day forecast is mostly
dry for the Corn Belt with heavy precipitation expected in the southeastern
U.S. and along the Atlantic coast. Monday's final Crop Progress report from
USDA estimated roughly 1.1 billion bushels (bb) of unharvested corn, more than
600 mb of which is in northern states. Technically, the trend for cash corn
remains down, but keep in mind we are entering a less volatile time of year for
trading. Early Thursday, there were still 807 contracts of December corn open
with Friday set as the final day of trading. DTN's National Corn Index closed
at $3.53 Thursday, near its lowest price in three months and 19 cents below the
March contract. In outside markets, the December U.S. dollar index is up 0.37
in spite of an unexpected jump in U.S. jobless claims to a two-year high of
252,000, reported RTTNews.com. Outside commodities were mostly higher.
With Thursday's tweet from President Trump suggesting a trade deal with
China is close, Dow Jones Industrials are moderately higher and January
soybeans closed up 4 3/4 cents at $8.98 1/4. The Wall Street Journal cited
unnamed sources Thursday and claimed U.S. negotiators offered to roll back as
much as $180 billion of existing tariffs and cancel plans for new tariffs on
Sunday. We have heard false optimism before, but there does seem to be a chance
for a limited deal by Sunday. Aside from the trade talks, the final laps of
soybeans are being harvested around the country and it remains to be seen if
the USDA estimate of 3.55 bb will be reached after difficult fall conditions.
Unlike corn, USDA's Jan. 10 soybean crop estimate should be close to the final
number. So far in 2019-20, the demand side for soybeans has been encouraging
and that continued in Thursday's weekly export sales report. USDA said 38.6 mb
of soybeans were sold last week, primarily to unknown destinations and China;
53.0 mb of soybeans were shipped, adding to a shipment total that is 24% higher
in 2019-20 than the previous year. Rising soybean oil prices have increased
soybean crush incentives lately and January soybean oil closed up 0.79 cent
Thursday at 32.23 cents, the highest close in nine months. Outside the U.S.,
the seven-day forecast is generally favorable for Brazil's new soybean crop,
expecting broad rain coverage. Technically, the trend for DTN's National
Soybean Index is down, but from a larger perspective, prices are in the middle
of their one-year range. DTN's National Soybean Index closed at $8.37 Thursday,
holding above its lowest price in two months and 57 cents below the January
March KC wheat jumped up 12 cents to $4.42 3/4 Thursday, back to challenging
its four-month high in one quick swoop. It is difficult to point to any one
factor to explain Thursday's bullish surprise in wheat. In general, KC wheat
prices have been under pressure since June with managed futures funds net
short. The September low of $3.97 1/2 in March KC wheat was among the lowest in
13 years and has become a point of firm support with bearish funds now needing
to cover their net-short positions. It is no secret SRW wheat supplies are
lower in 2019-20 and it was HRS wheat that showed the most export sales among
wheat in Thursday's report. USDA said 18.5 mb of wheat were sold for export
last week with Japan and Philippines named as top customers; 14.3 mb of wheat
shipments were below the weekly pace needed to reach USDA's new export estimate
of 975 mb. Total shipments, however, are up 21% from last year. The overall
fundamental situation remains bearish for wheat with plentiful supplies around
the world, but there is room for prices to have modest rallies in winter,
before the next crop gets more attention. Technically, the trends remain up for
cash SRW and HRW wheats and sideways for HRS wheat. Open interest is
dangerously low for the December contracts of all three wheats, which expire
Friday. DTN's National HRW Index closed at $4.03 Thursday, near its highest
price in four months and 27 cents below the March contract. DTN's National SRW
Index closed at $5.12, down from a one-year high.
Todd Hultman can be reached at firstname.lastname@example.org
Follow him on Twitter @ToddHultman1
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