DTN Early Word Grains

A Most Meaningless Downturn - Maybe

6:00 a.m. CME Globex:

December corn was 5 cents lower, November soybeans were 9 cents lower, and September Kansas City (HRW) wheat was 5 cents lower.

CME Globex Recap:

Grains were lower overnight into Wednesday morning in what could be one of the most meaningless sell-offs of the year, coming ahead of USDA's July Supply and Demand and Crop Production reports. Outside markets of softs, energies, and metals were mostly higher with the most notable exception being cotton. There, like grains, traders could be waiting for Wednesday's USDA reports to be released. The U.S. dollar index was showing a small loss while DJIA futures rallied overnight.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 0.55 point higher at 21,409.07, the NASDAQ Composite gained 16.91 points (0.3%) to 6,193.30, and the S&P 500 dipped 1.90 points to 2,425.53 Tuesday. DJIA futures were 29 points higher early Wednesday morning. Asian markets closed mostly lower with Japan's Nikkei down 97.10 points (0.5%), Hong Kong's Hang Seng up 166.00 points (0.6%), and China's Shanghai Composite off 5.49 points (0.2%). European markets were trading higher with London's FTSE 100 up 70.98 points (1.0%), Germany's DAX gaining 82.69 points (0.7%), and France's CAC 40 adding 46.47 points (0.9%). The euro was down 0.0011 at 1.1457 while the U.S. dollar index slipped 0.03 to 95.73. September 30-year T-Bonds were 9/32 higher at 151'11 while August gold added $3.00 to $1,217.70. Crude oil was $0.68 higher at $45.72 while Brent crude gained $0.62 to $48.14. China's Dalian soybean futures were higher and Malaysian palm oil futures were lower again overnight.

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BULL BEAR
1) New-crop corn yield is expected to be reduced in USDA's July Crop Production report. 1) Corn ending stocks, both old-crop and new-crop, as well as new-crop production are all expected to be increased in USDA's July reports.
2) Soybean ending stocks, both old-crop and new-crop, and total new-crop production are all expected to be trimmed in USDA's July reports. 2) World ending stocks or soybeans are expected to be unchanged in the July WASDE report.
3) New-crop wheat ending stocks are expected to be decreased in USDA's July Supply and Demand report. 3) Old-crop ending stocks (new-crop beginning stocks) of all wheat are expected to increase in USDA's July Supply and Demand report.

The weekly Newsom on the Market column can be found on subscription sites only. On DTN Pro it is in News/Town Hall and on MyDTN in News/Columns.

MORE COMMODITY-SPECIFIC COMMENTS

CORN It's another USDA report day meaning corn traders could spend up to a minute watching something other than weather Wednesday. Highlights of this month's round of Supply and Demand and Crop Production reports are likely to be old-crop ending stocks (following the June 30 Quarterly Stocks report) and new-crop yield/production guesses. As for the latter, with next month's reports being the first survey based traders may not spend much time arguing over July numbers. From a technical standpoint, new-crop December corn looks to once again be forming a top on its short-term daily chart. If indeed its minor trend turns down Wednesday, initial support is pegged at $4.07 1/2, then $4.00 3/4. Delivery of 440 contracts was reported against the July issue, putting the total at 9,288 contracts.

SOYBEANS Soybean contracts traded lower overnight with most near session lows early Wednesday morning. Losses could quickly be erased late Wednesday morning following the release of USDA's July Supply and Demand and Crop Production reports. Of all the numbers set for release, the most intriguing could be old-crop ending stocks. The average pre-report guess came in at 434 mb, down 16 mb from USDA's June estimate. However, the continued pace of export demand combined with the June 30 quarterly stocks number are indicating 2016-2017 ending stocks could ultimately be smaller than that. Also, don't be surprised if some minor changes are made to the 2015-2016 ending stocks number. As for the soybean charts, new-crop November's daily is showing a possible short-term topping pattern. The contract remains sharply overbought, in prime position for a sell-off if traders perceive Wednesday's reports to be bearish. Delivery of 160 contracts was reported against the July issue, putting the total at 5,653 contracts.

WHEAT The wheat complex was trading lower early Wednesday, possibly due to exhaustion from this week's activity. The most notable feature has been increased commercial selling in Minneapolis spring wheat, while commercial buying reemerged in the Chicago SRW market. Neither should be surprised by USDA's July report numbers with domestic ending stocks of all wheat expected to decrease (new-crop) due in large part to a production cut in spring wheat. From a technical point of view, weekly charts for all three markets (including Kansas City HRW) continue to look top-heavy heading into Wednesday's round of monthly reports. If indeed a bearish reaction is seen it would put contracts that much closer to signals indicating changes in trend. Delivery of 38 contracts was reported against the July Chicago, putting its total at 996 contracts. Another 113 contracts were reported delivered against the July Kansas City issue increasing its total to 2,187 contracts.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.56 -$0.01 -$0.45 Sep -$0.006
Soybeans: $9.63 $0.04 -$0.67 Aug -$0.003
SRW Wheat: $5.20 $0.03 -$0.33 Sep $0.001
HRW Wheat: $4.89 $0.01 -$0.69 Sep $0.003
HRS Wheat: $7.56 -$0.01 -$0.41 Sep -$0.002

Darin Newsom can be reached at darin.newsom@dtn.com

Darin can be followed throughout the day at www.twitter.com\DarinNewsom

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