DTN Early Word Grains

Grains Off to a Lower Start... Again

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

July corn was down 3 cents, July soybeans were down 2 cents, and July Kansas City (HRW) wheat was down 7 3/4 cents.

CME Globex Recap:

Most stock markets are lower early Thursday after the Federal Reserve came through with another quarter-percent rate hike on Wednesday afternoon. So far, the losses are light and the Dow Jones futures are expected to open slightly lower. Most commodities are also trading lower early Thursday, but July crude oil is a little higher ahead of Thursday's meeting between Russia and Saudi Arabia. Thursday's surprise, August gold is quietly trading higher, rising up from its lowest prices in five months.

OUTSIDE MARKETS:

Wednesday's trading saw the Dow Jones Industrial Average close down 119.53 points at 25,201.20 and the S&P 500 down 11.22 points to 2,775.63, while the 10-year Treasury yield ended at 2.98% after the Fed raised the rate another quarter-percent. Early Thursday, DJIA futures were down 6 points. Asian markets were lower with Japan's Nikkei 225 down 227.77.02 points (-1.0%) and China's Shanghai Composite down 5.64 points (-0.2%). European markets were also lower with London's FTSE 100 down 44.01 points (-0.6%), Germany's DAX down 31.90 points (-0.2%), and France's CAC 40 down 8.54 points (-0.2%). The euro was up 0.0046 and the U.S. dollar index was down 0.24 to 93.30. June 30-year T-Bonds were up 17/32nds while August gold was up $7.70 to $1,309.00 and July crude oil was up $0.10 at $66.74. China's Dalian soybeans were steady to higher and Malaysian palm oil futures were up 0.7% overnight.

BULL BEAR
1) USDA's lower estimate of world ending corn stocks estimate looks reasonable in spite of questionable U.S. estimates. 1) December corn remains near its lowest prices in four months with good crop conditions and bullish noncommercials on the run.
2) Bullish arguments for soybeans have basically come down to hoping for a hot and dry U.S. summer. 2) Bullish noncommercials in soybeans are in a bind, losing money in a market overwhelmed by bearish concerns with adverse weather seen as the only hope.
3) Traders responded to USDA's lower corn and wheat crop estimates for Russia and the region is still dry. 3) Outside of Kansas, Oklahoma, and Texas, U.S. wheat conditions are in good shape with rain expected across the northern Plains this week.
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MORE COMMODITY-SPECIFIC COMMENTS

CORN July corn is down 3 cents Thursday, giving back more of Tuesday's report-related rebound, but also holding together better than soybean prices have lately. Thursday morning's weather map shows rain in northwestern Iowa with more expected across the northern Plains the next five days. The western Plains will see hot temperatures Thursday, from Texas to South Dakota, adding to crop stress and warning bears not to get too carried away so early in the season. Now that USDA has increased the export estimate for corn to 2.3 billion bushels in 2017-18, Thursday morning's export sales report will draw more attention with many wanting to see if corn can live up to the higher expectations. Technically, the trend remains down in corn with the uncertainty of a new growing season ahead.

SOYBEANS July soybeans are down 2 cents Thursday with bullish noncommercials still under stress in a market that has lost over a dollar in less than three weeks. Good crop conditions, trade concerns with China, and a record soybean harvest in Brazil have all ganged up on a market that was showing bullish hope at the end of April, but recently found itself without a bullish argument to support the enthusiasm. As sharp as the downtrend has been, there may be support for this market near last year's low of $9.35 and weather will remain an active concern through summer. USDA reminded us Tuesday that crush demand is doing well for U.S. soybeans, but so far in 2017-18, soybeans' export shipment pace has been bearish and we will see another weekly update at 7:30 a.m. CDT. 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 7 3/4 cents early, close to taking out Tuesday's low and trapping those caught up in the quick buying of Tuesday's flash gain after USDA reduced its wheat crop estimate for Russia. Winter wheat prices have looked choppy and indecisive the past month and a half while the market has tried to figure out what the new season of production will look like. So far, U.S. wheat looks good outside of three southern states, Canada has shown improvement from a month ago and Europe's crops look good. Concerns about dry weather remain in eastern Ukraine and southern Russia, but overall, it looks at this point like world wheat production will be relatively high again. Here in the U.S., hot temperatures hover over the southwestern Plains while the northern Plains are expecting more rain. Texas is expecting some rain relief early next week. Technically, the trend in winter wheat is choppy to higher with seasonal highs typically seen around early July.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.45 -$0.01 -$0.31 Jul $0.006
Soybeans: $8.73 -$0.17 -$0.63 Jul $0.012
SRW Wheat: $4.93 -$0.16 -$0.24 Jul $0.017
HRW Wheat: $5.27 -$0.12 -$0.12 Jul $0.025
HRS Wheat: $5.70 -$0.08 -$0.15 Jul -$0.001

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

Todd can be followed throughout the day on Twitter @ToddHultman1

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Todd Hultman