DTN Early Word Grains

Wheat Tries Second Day Higher

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

December corn was down 2 3/4 cents, November soybeans were down 7 1/2 cents, and September Kansas City (HRW) wheat was up 5 1/4 cents.

CME Globex Recap:

Global stock markets are starting mostly higher Friday while commodities are mostly lower with a quiet news day expected to end the week. In grains, row crops are modestly lower while wheat contracts are starting a second day higher, encouraged by Thursday's lower crop estimates from USDA.

OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average up 224.44 points at 24,924.89 and the S&P 500 up 24.27 points at 2,798.29 while the 10-year Treasury yield ended at 2.85%. Early Friday, DJIA futures were down 12 points. Asian markets are mostly higher with Japan's Nikkei 225 up 409.39 points (1.8%) and China's Shanghai Composite down 6.47 (-0.2%). European markets are a little higher with London's FTSE 100 up 34.84 points (0.5%), Germany's DAX up 16.59 points (0.1%), and France's CAC 40 up 14.86 points (0.3%). The euro was down .0043 and the U.S. dollar index was up 0.30 at 95.12. September 30-year T-Bonds were up 10/32nds while August gold was down $4.90 at $1,241.70 and August crude oil was down $0.37 at $69.96. Soybeans on China's Dalian Exchange were lower and Malaysian palm oil futures were down 1.2%.

BULL BEAR
1) USDA's July WASDE report provided lower-than-expected ending world stocks of corn and wheat. 1) USDA's good-to-excellent crop ratings remain high for row crops and spring wheat.
2) Soybeans survived Thursday's bearish USDA numbers with a one-cent gain -- are sellers finally getting carpal tunnel syndrome entering orders? 2) Tuesday's U.S. proposal for $200 billion of tariffs against China is the latest move keeping investors skittish in the markets.
3) Chicago wheat bounced back from Wednesday's new five-month low with USDA's help. 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 down 2 3/4 cents early Friday, trimming back Thursday's 6 cent gain after USDA showed world ending corn stocks at a lower than expected 152.0 mmt (5.98 bb) for 2018-19. It still seems odd that world corn stocks are expected to be 21% lower in the new-crop season and yet corn prices continue to trade near their lowest prices in 2018. Going against higher corn prices however is the possibility that corn yields will be much higher than the 174 bushels USDA is currently estimating and the problem that noncommercials were still net long as much as 148,352 contracts as of July 3. The central Corn Belt is expecting moderate showers the next few days that should include Missouri. Temperatures will be hot over the weekend in the southern Corn Belt, more moderate in the northern Corn Belt. 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 down 7 1/2 cents early Friday, still feeling bearish pressure from USDA's higher ending stocks estimates, even though Thursday ended with a one-cent gain. It is difficult to know what to make of USDA's decision to reduce the new-crop export estimate by 250 million bushels because no one knows where this trade war is headed or how long it will last. It was also puzzling that USDA raised the old-crop export estimate by 20 million bushels when the current season's shipments are down 6% from a year ago. Better than USDA's estimates are the market clues we are being given. On that front, the trend in soybeans remains down, but we also see commercials turning net long at these cheaper prices -- the lowest November soybean prices in nine years. As a side show, July soybean meal may be an interesting watch Friday as July grain contracts are set to expire by noon, but meal has had no deliveries and shows 199 contracts still open early Friday.

WHEAT September K.C. wheat is up 5 1/4 cents early, making a bid for a second day higher after USDA lowered its estimate of world ending wheat stocks by more than was expected. Crop reductions were seen in Europe, Russia, Ukraine, and Australia while U.S. production was a little higher and Canada stayed the same. The new-crop estimate of 9.59 billion bushels is down 5% from last season's record high levels, not enough of a difference to significantly change the landscape for wheat supplies or prices. However, there is still weather risk in 2018 so it is early to draw firm conclusions. September K.C. wheat is trading at the lower end of its range in 2018, but so far, has avoided challenging the low at $4.66 1/2. September Minneapolis wheat is up 1 3/4 cents, but still near its lows in 2018 with the U.S. spring wheat crop looking good, so far.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.14 $0.05 -$0.31 Sep -$0.004
Soybeans: $7.73 $0.00 -$0.60 Aug -$0.011
SRW Wheat: $4.59 $0.13 -$0.25 Sep -$0.002
HRW Wheat: $4.65 $0.07 -$0.16 Sep $0.001
HRS Wheat: $5.04 $0.03 -$0.27 Sep -$0.023

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