DTN Before The Bell Grains

Corn, Soybeans, Wheat Recover From Overnight Weakness

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Dow Jones futures are up 8 points early Wednesday. August crude oil is up 58 cents per barrel, the U.S. dollar index is down .0200 and August gold is down $4.00 an ounce.

Other Markets:

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

Corn:

Following the three-day, 29-cent drop from Monday's highs, corn was quiet and lower to begin Wednesday and now is 5 cents higher. For the next four days, the primary Corn Belt will face extreme temperatures and little rain, but the 7- to 10-day part of the forecast shows a cooler pattern with better rain chances. Storms are moving across the Dakotas early Wednesday with showers also in parts of the Eastern Corn Belt, and the remnants of Tropical Storm Barry brings some moisture to the Southeast. U.S. corn, on the demand side, continues to be out of contention, with Argentine corn on a FOB basis a 50- to 60-cent discount extending into late fall. Even Ukraine corn is offered 15 cents per bushel below U.S. offers. Better corn movement on Tuesday pressured interior basis levels in the Western Corn Belt, with rail values said to be down 5-10 cents. Even some Eastern Corn Belt bids retreated in the nearby, but remain historically very lofty. Funds, which had been selling, remain long an estimated 142,000 contracts of corn. Funds have sold an estimated 45,000 to 50,000 contracts since Monday. Pollination is expected to be widespread in the last 10 days of July into early August, and forecasts are for beneficial cooling to occur. But, until the weekend, scorching temperatures and higher than desired evening temperatures will certainly stress the crop in some areas. Forecasts seem to have turned wetter for dry Iowa, with the potential for 1- to 2-inch weekend rains. However, temperatures are expected to reach over 102 degrees in parts of the western Plains on Thursday. The extended weather outlook has a cooler and wetter August, and a warmer than normal fall, which will help to stave off any early frost. Ethanol margins with the recent rally in corn have been pressured to break-even or lower in some areas of the Midwest. On December corn, look for the $4.30-$4.35 area to hold the current break. DTN's National Corn Index closed at $4.27 on Tuesday, with an average basis of 8 cents under September.

Soybeans:

After falling 30 cents per bushel from Monday's high, it appears soybean futures have stabilized, with November beans stopping at $9.02 for the second straight day. The trade has become accustomed to mixed news from the renewed U.S.-China trade talks, with first optimism, then more tariff threats from President Donald Trump. Now comes word that, according to the State Council in China, China is going to step up intellectual property right protection. Perhaps that is a positive sign. However, none of the ramped-up buying of U.S. agricultural products that had been rumored the past few days has occurred, and the trade fears that some of the unshipped sales could be rolled forward without a trade deal. With China's economy weakening, as illustrated by the lowest 2nd quarter GDP since 1992, perhaps China has more incentive to get a trade deal done. Weather continues to be a mixed bag, with scorching hot temps probably good for crop maturity, but dryness is beginning to creep into some areas. The forecast for a cooler and wetter August bodes well for soybeans, if correct. Rains are moving across the Dakotas to start Wednesday, but there is anecdotal talk of failed acres and many prevented planting acres in that area. U.S. soybean demand has been tepid at best, and exports of U.S. soybeans remain 24% below a year ago. No doubt the trade deal has had a large impact, but more and more it is thought the demand-dampening impact of African swine fever may have been underestimated earlier. November soybeans are still caught in a range of $8.90 to $9.40 with a break out on either side likely leading to the next move. DTN's National Soybean Index closed at $8.18, reflecting an average basis of 69 cents under August.

Wheat:

Wheat, under pressure in the overnight, has rallied back to small gains to start Wednesday, likely dragged along by corn and soybean strength. The path for a continued rapid harvest pace appears open. U.S. wheat, though exports remain above year ago levels, is facing very stiff competition from both the Black Sea and Europe. Wednesday's Egyptian wheat tender for August is likely to be filled by Ukraine and/or Romania again, with the cheapest offer said to be from Ukraine at $198.50/mt FOB. That is significantly less than U.S. FOB wheat values. Despite the recent USDA cut in world wheat production of nearly 10 million metric tons as heat and dryness sapped yield, the world is still looking at a record supply of wheat. The funds, who had been selling wheat the past few days, have a fairly neutral position now, with a net short of 12,000 contracts of Chicago wheat. With rains again moving across the Dakotas, the spring wheat crop continues to look favorable, with both Minnesota and North Dakota 80% to 83% good to excellent. DTN's National HRW Index closed at $4.25 and the average basis is 22 cents under September.

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

Follow him on Twitter @Mantini_r

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Dana Mantini