DTN Before The Bell Grain Comments

Grains Mixed, China Back for Beans

Todd Hultman , DTN Grains Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

At 8 a.m. CDT, USDA announced 2.2 million bushels (60,000 mt) of soybeans were sold to China for 2016-17 and another 2.2 million bushels for 2017-18). November soybeans were up 5 3/4 cents early Friday, a small bounce in the aftermath of Thursday's WASDE report and 33-cent tumble.

Other Markets:

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

Corn:

December corn was up a half-cent early Friday, staying at the low end of Thursday's 15 1/4 cent drop. The bearish shock of USDA's 169.5 bushel corn yield estimate is still fresh and even though it may not last the season, it caught corn prices at a time when speculators were long and expectations were high, riding on this year's adverse weather reports and the more bullish readings of weekly NASS crop ratings. Once again, however, we see another example of market expectations getting out ahead of a limited methodology that USDA will claim it followed. Later Thursday,
USDA's Farm Service Agency said 950,344 acres of corn were reported as prevented plantings, a surprisingly low number after this year's wet spring in the eastern Midwest. Indiana, one of the wettest states this spring, only reported 32,423 prevented acres. Aside from USDA, December corn is stressing bullish speculators while also offering commercials the lowest prices in ten months and a chance to get lower as harvest gets closer. DTN's National Corn Index closed at $3.17 Thursday, priced 40 cents below the September contract and at the low end of its sideways range in 2017. In outside markets, the September U.S. dollar index is down 0.27 after the U.S. Labor Department said consumer prices were up .1% in July and up 1.7% from a year ago, still below the Federal Reserve's target.

Soybeans:

At 8 a.m. CDT, USDA announced 2.2 million bushels (60,000 mt) of soybeans were sold to China for 2016-17 and another 2.2 million bushels for 2017-18). Earlier, November soybeans were up 5 3/4 cents, a modest bounce after Thursday's 33-cent drop and was accompanied by early gains in soybean meal and bean oil. USDA's yield estimate of 49.4 bushels an acre was higher than expected, but probably not as outlandish as USDA's corn estimate and the 4.38 billion bushel production estimate was another bearish reminder of this year's record plantings. USDA aside, the five-day forecast remains dry for much of the central Midwest with better chances of rain later next week. The one bullish part of Thursday's WASDE report which traders ignored was the increase in export estimates for the current and new-crop seasons -- another sign that strong world demand continues to support soybean prices, even after several years of big crops. November soybeans are offering their lowest prices in six weeks, but may not be low enough yet to entice commercials in front of this year's harvest. It should also be noted that tensions with North Korea involve China and are a bearish concern for soybean prices. DTN's National Soybean Index closed at $8.74 Thursday, priced 66 cents below the November contract and at its lowest price in over a month. Among August contracts, there were 5 deliveries of soybeans, 138 deliveries of meal, and 70 deliveries of soybean oil early Friday. August grain contracts expire early on Monday, Aug. 14.

Wheat:

September Chicago wheat was down a penny early, trading quietly near its lowest prices in nine weeks after USDA added another 150 million bushels (4 mmt) to its estimate of 9.73 billion bushels (264.49 mmt) of world ending wheat stocks. Wheat bulls will rightly point out that over 5 billion bushels of those stocks are held in China and India and are not exportable supplies. The bottom line however, is that potential buyers of wheat are showing no signs of concern about obtaining wheat supplies in the year ahead and that will make it difficult for wheat prices to do much more than maintain a sideways range for the rest of 2017. If there is good news for wheat producers it is that the trading range wheat prices find in late 2017 is likely to be well above year-ago levels, thanks to this year's lower U.S. production. DTN's National SRW index closed at $4.11 Thursday, priced 30 cents below the September contract and at its lowest price in nearly two months.

ToddHultmancan be reached at todd.hultman@dtn.com

FollowTodd on Twitter @ToddHultman1

(BAS)