DTN Before The Bell Grain Comments

Soybean Slide Continues

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

Morning CME Globex Update:

A stronger U.S. Dollar Index and slipping energy prices could lend an overall bearish tone to commodity trade Friday morning, but the grain and oilseed markets seem to have worked through the bulk of their futures selling activity during the overnight session.

Other Markets:

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

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Corn:

Corn futures prices were hovering around unchanged Friday morning amid outside market pressure and variable interpretations of the weather forecast, but after already falling more than 14 cents this week, there are now a few sources of potentially bullish support for the market. The weekly update to the United States Drought Monitor showed nearly 4 more percentage points of droughty area in the continental U.S. (now 46.28 percent). Some of that expansion in abnormally dry conditions occurred in corn-producing regions of Indiana, Illinois, Iowa, and eastern South Dakota, and this is a timeframe when the corn crop would develop best if it receives at least an inch of rain per week. There will be considerable uncertainty not only about yield prospects but also export projections in the supply and demand estimates which will be released on Tuesday June 12 (the monthly WASDE report). Meanwhile, in the old crop cash market, the DTN National Corn Index, an average of cash bids around the country, was $3.44 Thursday, showing the national average basis level steady at 32 cents under the July futures contract.

Soybeans:

The soybean market has been shedding an average of 12 cents per day during the past five trading sessions, and so far Friday, it has showed its inclination to follow a similar pattern. There are broadly good growing conditions for most U.S. soybean fields at this time, but the pressure on soybean prices comes from other bearish sources, like continued international trade uncertainty and a lower-trending Brazilian real. Nearby old crop soybean contracts are experiencing relatively heavier selling activity than the new crop futures contracts, driving the carry spreads wider. The DTN National Soybean Index was $9.09 Thursday, showing the national average basis bid slightly stronger at 65 cents under the July futures contract.

Wheat:

Wheat futures were mixed overnight, with winter wheat prices generally experiencing losses and spring wheat futures posting light gains. Mexico is far and away the number one export customer for U.S. Hard Red Winter Wheat, taking more than twice as much as any other country (including Japan), so the current trade tensions weigh on this winter wheat market as much as they do on the feed grains and oilseeds. With only a 57-cent premium for July Minneapolis wheat futures over KC wheat futures, the two markets may seem to be out of line with historical expectations, but the differences in yield prospects may explain this. Yield reports from HRW harvest continue to be disappointing. Also, once basis differences are considered, the premium for HRS is relatively stronger: DTN's Hard Red Spring wheat index came to $5.83 Thursday, or 66 cents higher than the average cash bid of $5.17 for HRW wheat. The SRW Index was $5.00, showing steady basis bids at 27 cents under the July Chicago contract.

Elaine Kubcan be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

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Elaine Kub