DTN Early Word Grains
Investors Return After Bearish Tuesday
July corn was up 1 3/4 cents, July soybeans were up 3 3/4 cents, and July Kansas City (HRW) wheat was up 6 3/4 cents.
CME Globex Recap:One day after news of new U.S. tariffs left most stock markets and commodities lower, investors have returned, putting modest plus signs back in front of Tuesday's losses.
OUTSIDE MARKETS:Tuesday's trading saw the Dow Jones Industrial Average drop 287.26 points to 24,700.21 while the S&P 500 was down 11.16 points to 2,762.59 and the 10-year Treasury yield ended at 2.89%. Early Wednesday, DJIA futures were up 120 points. Asian markets were higher with Japan's Nikkei 225 up 276.95 points (1.2%) and China's Shanghai Composite up 7.91 (0.3%). European markets were also higher with London's FTSE 100 up 98.43 points (1.3%), Germany's DAX up 47.01 points (0.4%), and France's CAC 40 down 15.68 points (0.3%). The euro was down 0.0007 and the U.S. dollar index was up 0.10 to 95.11. June 30-year T-Bonds were unchanged while August gold was down $3.90 to $1,274.70 and August crude oil was up $0.38 at $65.28. Soybeans on China's Dalian Exchange were steady to lower and Malaysian palm oil futures were down 0.1%.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
| BULL | BEAR | ||
| 1) | Corn's rebound from Tuesday's lows was impressive and was likely helped by USDA's lower estimate of world ending corn stocks. | 1) | Friday's noncommercial net longs in corn were still the most since June, 2016 and too high for this market. |
| 2) | Bullish arguments for soybeans still boil down to hoping for a hot and dry U.S. summer. | 2) | Uncertainty over trade is keeping potential buyers far away from the soybean market -- a bearish dynamic with no solution in sight yet. |
| 3) | The forecast for southern Russia is still mostly dry, but has not been enough to support wheat prices. | 3) | The trends have turned lower for all three wheats, in line with their typical seasonal patterns. |
CORN July corn is up 1 3/4 cents at $3.55 1/2 early Wednesday, showing the most bullish performance after Tuesday's panic selling, related to investor nervousness over the escalating trade war between the U.S. and China. Fundamentally, it makes sense as China does not import much corn from anyone, let alone the U.S. and USDA's outlook for lower world ending corn stocks in 2018-19 also remains a strong argument for corn prices finding support. The most bearish factors for corn lately have been a combination of good growing weather in the U.S. and too many noncommercials caught on the long side of the market, suffering big losses in June. Nebraska, Kansas, Iowa, and surround areas got rain overnight, possibly too much in some areas. The five-day forecast expects a broad coverage of rain around the Corn Belt with moderate summer temperatures, all of which remains a bearish influence on prices. Technically, the trend in corn is still down, but prices have shown encouraging resilience since Tuesday morning.
SOYBEANS July soybeans are up 3 3/4 cents early, but still below the 2017 spot low of $9.00 after Tuesday's brief collapse in prices, related to news of more U.S. tariffs on the way. So far, China says it will keep matching U.S. tariff increases with their own and it is difficult to see where this is all headed. Underneath all the talk, China's purchases and shipments of U.S. soybeans are down 20% in 2017-18, helped by Brazil's record harvest and limiting demand in the U.S. Add to that a start of mostly favorable growing weather in the U.S. and we can see why soybean trade has been a one-way affair to lower prices, magnified by noncommercial liquidation. Fundamentally, USDA is expecting a modest reduction of ending world soybean stocks, thanks to this year's drought in Argentina, but overall, a bullish argument is difficult to find and uncertainty over trade with China is keeping potential buyers away. For now, the trend is clearly down with July soybeans trading at its lowest spot prices in over two years. November soybeans are holding above their 2017 low of $9.07.
WHEAT July K.C. wheat is up 6 3/4 cents Wednesday, finding support at the three-month low of $4.75 1/2 as the harvest of winter wheat was temporarily interrupted by rain overnight in Nebraska and Kansas. While it is no secret that drought hurt yields from Kansas to Texas, the rest of the winter wheat crop has fared well and USDA's crop rating for spring wheat is the highest seen since 2010. North Dakota is the one dry spot this year and only has light rain forecast this week, while the rest of the northwestern Plains are expecting moderate amounts. With southern Russia seen as the only concern of dryness worth mentioning outside of North America, it looks likely that the world will have another largest wheat harvest in 2018 and supplies will stay plentiful -- a bearish fundamental outlook. The trends for all three wheats remain down early Wednesday.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.24 | -$0.02 | -$0.29 | Jul | $0.003 |
| Soybeans: | $8.27 | -$0.18 | -$0.62 | Jul | $0.012 |
| SRW Wheat: | $4.56 | -$0.11 | -$0.22 | Jul | $0.008 |
| HRW Wheat: | $4.81 | -$0.11 | -$0.02 | Jul | $0.051 |
| HRS Wheat: | $5.35 | -$0.14 | -$0.14 | Jul | $0.002 |
Todd Hultman can be reached at todd.hultman@dtn.com
Todd can be followed throughout the day on Twitter @ToddHultman1
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