DTN Early Word Grains

Grains Start Lower, Possible Rate Hike Ahead

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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6:00 a.m. CME Globex:

July corn was down 1 3/4 cents, July soybeans were down 8 3/4 cents, and July Kansas City (HRW) wheat was down 6 1/4 cents.

CME Globex Recap:

European stock markets are lightly higher and Dow Jones futures are modestly higher early Wednesday, just hours away from another Federal Reserve statement that is likely to include another rate hike of a quarter percent and possibly have interesting clues about what lies ahead. The June U.S. dollar index is slightly lower and the commodity board is nearly all red to start the day, grains included.

OUTSIDE MARKETS:

Tuesday's trading saw the Dow Jones Industrial Average close down 1.58 points at 25,320.73 and the S&P 500 up 4.85 points to 2,786.85, while the 10-year Treasury yield ended at 2.96%. Early Wednesday, DJIA futures were up 32 points. Asian markets were mixed with Japan's Nikkei 225 up 88.02 points (0.4%) and China's Shanghai Composite down 30.01 points (-1.0%). European markets were a little higher with London's FTSE 100 up 7.94 points (0.1%), Germany's DAX up 17.22 points (0.1%), and France's CAC 40 up 11.46 points (0.2%). The euro was up 0.0005 and the U.S. dollar index was up 0.01 to 93.83. June 30-year T-Bonds were down 9/32nds while August gold was down $1.20 to $1,298.10 and July crude oil was down $0.13 at $66.23. China's Dalian soybeans were steady and Malaysian palm oil futures were down 0.4% overnight.

BULL BEAR
1) Corn got an unexpected boost from USDA's lower world ending corn stocks estimate. 1) Recent new lows in corn and soybean futures as U.S. row crops continue to show favorable growing conditions in early 2018.
2) Bullish arguments for soybeans remain difficult to find, but the growing season is still young. 2) Noncommercial accounts have suffered big losses and pressure is on to liquidate long positions in corn and soybeans.
3) Traders responded to USDA's lower corn and wheat crop estimates for Russia; the region is still dry. 3) Spring wheat conditions are favorable early with rain expected in the northwestern Plains and western Canadian Prairies.

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 July corn is down 1 3/4 cents Wednesday, giving back part of Tuesday's rebound after USDA lowered its estimate of 2018-19 world ending corn stocks with reductions in corn crop estimates for Brazil and the Former Soviet Union. After droughts in Argentina, dry weather in Brazil, and now possibly Russia, the world's corn production is expected to fall roughly 38 mmt (1.5 bb) short of demand in 2018-19 and allow for a more reasonable level of surplus. Here in the U.S., rain is falling in the Texas Panhandle early Wednesday and the seven-day forecast expects a broad coverage of rain across the central U.S. that includes the western Plains. A donut hole of Missouri to Indiana will receive lighter amounts. Overall, U.S. crop conditions remain favorable for corn and the price trend remains down with possible support at the 2018 low of $3.62.

SOYBEANS July soybeans are down 8 3/4 cents Wednesday, pressured by early commercial selling and continuing their bearish slide, even after seeing a modest reduction in the 2018-19 estimate of U.S. ending soybean stocks. As with corn, soybean prices are currently feeling the most bearish heat from a combination of good U.S. growing conditions in mid-June plus a sizeable number of noncommercials losing money on bullish positions that they need to get out of. USDA's estimate of a 119.0 mmt (4.37 bb) crop in Brazil this year could have added more bearish pressure, but was offset by a 2 mmt reduction in Argentina's crop estimate of 37.0 mmt. With Tuesday's WASDE report behind, the next concern for soybeans is what USDA will say in the June 29 Grain Stocks and Acreage report. Technically, the trends remain down for both, old-crop and new-crop soybeans with possible support at the 2017 low of $9.35.

WHEAT July K.C. wheat is down 6 1/4 cents early, giving back part of Tuesday's 18 3/4 cent gain after USDA reduced Russia's wheat crop estimate by 3.5 mmt to 68.5 mmt (2.52 bb). Here in the U.S., USDA's slight increase in the estimate of U.S. wheat production to 1.827 billion bushels may have been disappointing and it is fair to wonder if the estimate is too high, but the HRW wheat estimate of 650 million bushels is down 750 mb from a year ago. While more will be learned from the winter wheat harvest underway, spring wheat conditions are likely to get another boost this week from moderate to heavy showers across the northern Plains and more moderate amounts up and down the western Plains. Outside of North America, the Ukraine and southern Russia remain on the dry side while wheat crops in Europe appear to be doing well. Spot K.C. wheat prices remain near their highest level in a year, but so far, are staying within the boundaries of May's trading range.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.46 $0.10 -$0.31 Jul $0.002
Soybeans: $8.90 $0.01 -$0.64 Jul $0.011
SRW Wheat: $5.09 $0.20 -$0.26 Jul $0.004
HRW Wheat: $5.39 $0.21 -$0.14 Jul $0.026
HRS Wheat: $5.78 $0.03 -$0.15 Jul $0.004

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

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Todd Hultman