DTN Before The Bell Grain Comments

Grains Lower, But China Likes Milo

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

Morning CME Globex Update:

Corn, soybeans, and winter wheat were all starting the day lower along with most other commodities on Thursday. USDA's weekly report of export sales was bearish for corn, soybeans, and wheat, but showed marketing year highs of milo sales and shipments, thanks to interest from China.

Other Markets:

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

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Corn:

March corn was down a half-cent early Thursday, not showing any sign of shaking off its winter blues while U.S. corn supplies are plentiful and exports are slow. Early Thursday, USDA said last week's export sales and shipments of corn totaled 34.5 and 23.3 million bushels respectively, a bearish combination that put total corn shipments down 38% in 2017-18 from a year ago. Here in the U.S., corn futures have not shown much reaction to concerns of dry weather in Argentina, but FOB corn prices in Brazil have jumped up to $4.03 a bushel and are now slightly higher than prices at the U.S. Gulf. It is not yet known whether this early December weather scare will turn out to be significant, but it does give noncommercial bears something to be a little nervous about. For now, March corn remains in a downtrend near spot corn's lowest prices in eleven years. DTN's National Corn Index closed at $3.11 Wednesday, priced 42 cents below the March contract and down from its highest price in two months. Early Thursday, there were 796 delivery intentions in December corn. In outside markets, the December U.S. dollar index is up 0.09 even though the European Union turned in respectable GDP growth of 2.6% for the third quarter from a year ago, reported RTTNews.com.

Soybeans:

January soybeans were down 8 cents early, turning back from recent attempts to make a new four-month high while many have concerns about dry weather in Argentina. So far, the risk of drought in southern Brazil and Argentina is still a legitimate threat as the seven-day forecast remains mostly dry for those two regions and La Nina remains in effect. It is understandable that traders are cautious about taking soybean prices to new highs as we have all seen early season concerns disappear before, but this one deserves more monitoring. If China is concerned about the situation in South America, they are not panicking yet as the pace of U.S. soybean exports remains down from a year ago. Early Thursday, USDA said last week's export sales and shipments of soybeans totaled 74.1 and 74.2 million bushels respectively, putting total soybean shipments down 11% from a year ago. Technically, the trend in January soybeans remains sideways with both soybeans and soybean meal turning back from known areas of resistance. DTN's National Soybean Index closed at $9.30 Wednesday, priced 73 cents below the January contract and down from its highest price in four months. Thursday's delivery intentions for December contracts totaled 169 for soybean meal and 128 for soybean oil.

Wheat:

March Chicago wheat was down 1 1/2 cents and March Minneapolis wheat was up 1/2 cent at the morning break, still under pressure after Statistics Canada raised its estimate of all wheat production from 27.1 to nearly 30.0 mmt on Wednesday. That is a bearish surprise, especially given the drier conditions seen across the southern Canadian Prairies this summer and adds to bearish concerns that the U.S. may not even export a billion bushels this season. Early Thursday, USDA said last week's export sales and shipments of wheat totaled 11.8 and 14.6 million bushels respectively, another bearish combination for the week. On a more upbeat note, export sales and shipments of milo both reached marketing year highs last week, thanks to active demand from China. The seven-day forecast remains mostly dry up and down the western U.S. Plains, but is not likely to be a concern in December. For now, winter wheat futures remain under bearish pressure, supported by cheap prices and some commercial buying. DTN's National SRW index closed at $3.86 Wednesday, priced 39ents below the March contract and holding above its August low while futures contracts make new lows. Among December contracts, there were 90 delivery intentions for Chicago wheat and 1 for K.C. wheat early Thursday. Open interest has become dangerously low in December wheat contracts.

Todd Hultmancan be reached at todd.hultman@dtn.com

FollowTodd on Twitter @ToddHultman1

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Todd Hultman