DTN Before The Bell Grain Comments

Grain Markets Brace for More Bearishness

Elaine Kub
By  Elaine Kub , Contributing Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

The grain and oilseed markets await a monthly supply and demand report, which is widely expected to show bearish adjustments. After seven weeks of an uninterrupted downward trend, corn and soybeans are trading near their contract lows established Wednesday. The weekly export sales report showed 402,100 metric tons of old crop corn, 128,000 mt of new crop corn, 158,600 mt of old crop soybeans, 270,800 mt of new crop soybeans, and 136,400 mt of wheat sold.

Other Markets:

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

Corn:

The corn market's expectations for fresh supply estimates are generally bearish, with surveyed traders guessing U.S. yield might be projected at 175.3 bushels per acre and 2018/19 ending stocks expected to be 1.733 billion bushels. Tiny gains at the start of Thursday's trading session do virtually nothing to counteract the 18 percent slide experienced so far during the past seven weeks, and a lackluster export sales report hasn't shifted the tone, either. The July WASDE report isn't typically a huge market mover for corn because crop conditions are already widely known, but at 11 a.m. Central Time, traders will be watching carefully to see how USDA's economists account for China's soybean tariffs and Mexico's pork tariffs on their supply-and-demand balance sheets. Big movements in any of the ag markets are likely to spill over into the others. The DTN National Corn Index, an average of cash bids around the country, was $3.09 Wednesday, showing national average basis stronger at 31 cents under the September futures contract. There were 249 issues and stops in the daily deliveries report for the expiring July corn futures contract, which will no longer trade after this Friday.

Soybeans:

Not since December 2008 has the continuous soybean chart dropped below $8.30 per bushel, but here we are, and no major buying interest is noticeable Thursday morning. Details in the weekly export sales report reminded traders that the export scenario for U.S. soybeans is extremely challenging amid an ongoing trade war with China, who used to be the number one customer. Those weekly export sales numbers, 158,600 metric tons of old crop and 270,800 metric tons of new crop soybeans, included lots of switching from "unknown destinations." The July WASDE report is expected to bearishly show a 48.8 bushel per acre yield projection and a 491 million bushel ending stocks projection for the 2018/19 soybean marketing year. Meanwhile, Malaysian palm oil futures prices have rapidly dropped 4 percent so far this week. In the U.S. cash soybean market, average soybean basis bids strengthened to 59 cents under the August contract Wednesday, bringing the DTN National Soybean Index to $7.74 per bushel. There were 313 issues and stops in the daily deliveries report for the expiring July soybean futures contract and 782 issues and stops for the expiring July soybean oil contract.

Wheat:

Wheat futures prices are mixed at the start of Thursday's trade, and trading volume is likely to remain light until after the monthly WASDE report is released. The July report includes fresh NASS data about wheat production, but most traders are expecting the production projections for Soft Red Winter and Hard Red Winter wheat to remain close to last month's numbers. The U.S. spring wheat production, expected to be around 600 million bushels, would represent a 44 percent increase over last year's crop. On Thursday, the outside markets are generally supportive to grain prices, with crude oil now stabilizing after Wednesday's volatile $4 drop. DTN's collected SRW Index came to $4.47 Wednesday (still 25 cents under the September Chicago contract); the HRW Index came to $4.58; the Spring Wheat Index came to $5.01; and the average Soft White wheat bid was $5.05 per bushel. There were 43 issues and stops in the daily deliveries report for the expiring July KC wheat futures contract, representing warehoused Hard Red Winter wheat.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub