DTN Before The Bell Grain Comments

Grains Sag Lower, Eye USDA Report

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

Morning CME Globex Update:

At 8 a.m. CST, USDA announced 5.1 million bushels (130,000 mt) of U.S. corn were sold to unknown destinations for 2017-18. Before the announcement, corn, soybeans, and all three wheats were starting lower early Tuesday, possibly setting up for a quiet day of trading ahead of Thursday's WASDE report. The eastern Midwest got more rain overnight, adding to harvest difficulties.

Other Markets:

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

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Corn:

At 8 a.m. CST, USDA announced 5.1 million bushels (130,000 mt) of U.S. corn were sold to unknown destinations for 2017-18. Before the announcement, December corn was down 3/4 cent early Tuesday along with many other commodities that are starting Tuesday with a bearish reaction to Monday's higher prices. In the case of corn, Monday's early gain did not hold so Tuesday's early drift lower is looking like just another day of low-volume trading in front of Thursday's WASDE report. The main concern in Thursday's report will be USDA's new production estimate and many are expecting a higher yield that would have been considered outrageous earlier this year when there was plenty of talk about drought in the Dakotas creeping into Iowa and Illinois. Even now, the eastern Midwest is struggling to get its crop out of the field and parts of the western Midwest are dealing with corn knocked down by high winds. Late Monday, USDA said 30% of the U.S. corn crop was still in the field. The weather of 2017 has had plenty of challenges, but as long as the market accepts USDA's U.S. ending stocks estimate of 2.34 billion bushels or possibly higher on Thursday, it is difficult for corn prices to attract buyers. For now, the trend remains sideways in December corn, helped by commercial buying at the lower end of the trading range. DTN's National Corn Index closed at $3.07 Monday, priced 41 cents below the December contract and is still holding above its August low. In outside markets, the December U.S. dollar index is up 0.34, challenging its highest prices in over three months.

Soybeans:

January soybeans were down 1 cent early Tuesday, continuing to hold sideways within a gradual uptrend as traders keep one eye on Brazil's weather and another eye on Thursday's WASDE report. This week's forecast for central Brazil continues to promise a broad coverage of rain and the area has seen some moisture, but is still waiting for more. Most of the attention on Thursday's report will focus on USDA's soybean production estimate after USDA said on Monday that 90% of soybeans were harvested. There is also a chance that the soybean export estimate could be trimmed as the early pace in 2017-18 is running below a year ago. Don't be surprised if President Trump's visit to China announces a big soybean sale this week as these will be soybeans that the market already anticipates are needed by China. Technically, the trend is up in January soybeans, but it is gradual and there is plenty of uncertainty ahead about Brazil's weather. DTN's National Soybean Index closed at $9.11 Monday, priced 83 cents below the January contract and down from its highest price in over two months. 33 delivery intentions were reported for November soybeans early Tuesday.

Wheat:

December Chicago wheat was down 4 cents early Tuesday, quickly erasing most of Monday's gain with no strong arguments to help sustain a rally. Late Monday, USDA said 91% of winter wheat was planted, 75% was emerged and 55% was rated good to excellent. The catch of course, is that without knowing the size of the next crop, we don't know what those percentages are based on. Thursday's WASDE report will be another reminder that the entire world has plenty of wheat and while that is true, it is very difficult for the U.S. to find willing buyers for its wheat. The perennial hope is that a weather problem would pop up somewhere and change the dynamic, but late in 2017, the weather threat has come and gone. Now in November, that hope is slim as the northern Hemisphere slips into winter. With wheat supplies plentiful and prices sitting at cheap levels, a sideways to lower trend is likely for the next several months. DTN's National SRW index closed at $3.95 Monday, priced 36 cents below the December contract and holding above its August low.

Todd Hultman can be reached at todd.hultman@dtn.com

Follow Todd Hultman on Twitter @ToddHultman1

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Todd Hultman