DTN Early Word Grains

Battered Grains a Little Higher on Report Day

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

December corn was up 2 3/4 cents, November soybeans were up 3 3/4 cents, and September Kansas City (HRW) wheat was up 2 1/2 cents.

CME Globex Recap:

Investors limped back into global stocks early Thursday while commodities were mixed and grains a little higher overall. Trade continues to be a concern for the world economy and more specifically, soybean prices. USDA's next WASDE report is set for 11 a.m. CDT and is expected to be bearish for row crops.

OUTSIDE MARKETS:

Previous closes on Wednesday showed the Dow Jones Industrial Average down 219.21 points at 24,700.45 and the S&P 500 down 19.82 points at 2,774.02 while the 10-year Treasury yield ended at 2.84%. Early Thursday, DJIA futures were up 177 points. Asian markets are higher with Japan's Nikkei 225 dup 255.75 points (1.2%) and China's Shanghai Composite up 59.89 (2.2%). European markets are a little higher with London's FTSE 100 up 48.63 points (0.6%), Germany's DAX up 39.57 points (0.3%), and France's CAC 40 up 18.40 points (0.3%). The euro was steady and the U.S. dollar index was up 0.06 at 94.77. September 30-year T-Bonds were down 9/32nds while August gold was up $0.60 at $1,245.00 and August crude oil was up $0.65 at $71.03. Soybeans on China's Dalian Exchange were steady to lower and Malaysian palm oil futures were down 0.6%.

BULL BEAR
1) Let's face it, bullish factors for grains are difficult to find these days. 1) USDA's good-to-excellent crop ratings remain high for row crops and spring wheat.
2) CFTC data shows commercials added to net long positions in soybeans and spring wheat as of July 3. 2) Tuesday's U.S. proposal for $200 billion of tariffs against China is the latest reason keeping investors skittish in the markets.
3) Thursday's WASDE report should show a modest reduction in USDA's estimate of world wheat production. 3) Downtrends remain in effect for corn, soybeans, and all three wheats with potential buyers difficult to entice.

MORE COMMODITY-SPECIFIC COMMENTS

CORN December corn is up 2 3/4 cents early Thursday, finding room for a modest bounce after Wednesday's prices fell to a new 2018 low. Thursday is report day and USDA is likely to increase its estimate of U.S. ending corn stocks for 2018-19 as good weather should support a yield increase and the June 29 report of corn stocks showed slower demand than was expected. Dow Jones' survey expects a 1.73 billion bushel estimate of ending stocks, but there is room for a higher number. Temperatures are expected to remain hot for the southern and western Corn Belt the next four days before more moderate readings show up on Monday. The seven-day forecast expects a broad coverage of rain, which will be most favorable for crops. Technically, the trend in corn remains down and USDA's corn crop rating remains high. USDA's outlook for lower world corn supplies in 2018-19 remains the one factor that should help prices find support above last year's lows.

SOYBEANS November soybeans are up 3 3/4 cents early, also getting a modest bounce ahead of Thursday's WASDE report after posting its lowest November close in nine years on Wednesday. Dow Jones' survey of analysts is expecting USDA to increase U.S. ending soybean stocks from 385 to 491 million bushels for the 2018-19 season, related to the impact of China's 25% tariff. Like corn, there may also be an upward bump in soybeans' yield estimate as weather has been favorable for early conditions. Temperatures are staying more moderate in the eastern Midwest and rain in the seven-day forecast should help offset the higher temperatures in the western Midwest that will hang around through Sunday. Thursday's weekly report of export sales will be watched, but it has been a long time since China made a positive contribution. Thursday's WASDE report is expected to be bearish, but soybean prices have already been punished extensively. For now, the trend remains down.

WHEAT September K.C. wheat is up 2 1/2 cents early Thursday with a lower estimate of world ending wheat stocks expected to offset a higher estimate of U.S. ending wheat stocks. Traders will be watching for possible crop estimate reductions for Europe, Russia, Australia, and any other surprise that may come up. On the other hand, U.S. exports have been dragging and Dow Jones expects USDA's estimate of U.S. ending wheat stocks to be increased from 946 to 982 million bushels -- not much lower than the previous season's 1.08 billion bushels. The bigger problem for wheat prices is unless further weather problems arise in 2018, the reductions to date are not large enough to significantly change the price landscape or even help U.S. wheat exports. Weather is still a risk in 2018, but the trends for all three wheats remain down.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.09 -$0.07 -$0.31 Sep $0.009
Soybeans: $7.74 -$0.22 -$0.59 Aug $0.004
SRW Wheat: $4.47 -$0.20 -$0.25 Sep $0.000
HRW Wheat: $4.58 -$0.15 -$0.16 Sep $0.053
HRS Wheat: $5.01 -$0.12 -$0.24 Sep -$0.004

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

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Todd Hultman