DTN Before The Bell Grain Comments

Grain Markets Confident About Supplies

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

Morning CME Globex Update:

Relatively strong volumes of bargain-hunting buying interest have been noted Monday morning in the corn and soybean futures markets. Acting against them, however, are the fundamentally bearish forecasts of favorable growing conditions and large production prospects for corn, soybeans, and spring wheat.

Other Markets:

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

Corn:

Row crop futures markets remain deep in the throes of a downward trend. Over the past seven weeks, corn prices have fallen relatively less than soybeans: 18 percent compared to 23 percent, so the new crop soybean-to-corn price ratio has diminished and now sits at 2.35-to-1. Fundamental justification can be made for the lower trend by considering the widely favorable crop conditions this summer, which will get another look in Monday afternoon's Crop Progress report. However, after such a steep and extended loss, the corn market may start to expect buyers to step in at these bargain prices and potentially spark a correction. Large portions of the northwestern Corn Belt and even a few locations in Illinois now have a spot bid for corn with a $2 as the front digit. The DTN National Corn Index, an average of cash bids around the country, was $3.10 Friday, showing national average basis steady at 31 cents under the September futures contract.

Soybeans:

After sinking to fresh contract lows overnight, trading volume in the soybean futures market has picked up through the early part of Monday's session, and prices have tiptoed into lightly positive territory. Traders are expecting to see a monthly NOPA crush report that shows strong domestic demand for soybeans. If the report shows June crush at the average guess of 159.6 million bushels, it would represent almost 4 percent more demand than last year at this time. On the other hand, news from China may maintain some of the overall bearish mood: China's annual pace of growth was "only" 6.7 percent in a quarterly report. And for China's domestic soybean production prospects, recent heavy rain across their soybean-growing areas, as well as scattered thunderstorms forecast for northern China this week, are favorable. Similarly, a favorable monsoon season forecast for South Asia will allow the global edible oils market to feel confident about future supplies. Malaysian palm oil futures have kicked off Monday's oilseed trade with a slight bounce off Friday's contract lows. Back in the U.S., nationwide soybean basis bids averaged 61 cents under the August contract Friday, bringing the DTN National Soybean Index to $7.58 per bushel.

Wheat:

The U.S. wheat markets have so far resisted the temptation to follow corn and soybeans a little higher Monday morning, but the buying interest could spread to other commodities if the U.S. Dollar Index remains lower through the session. The Paris milling wheat chart has shown resistance at 187 Euros (equivalent to 5.96 USD per bushel), and an extended rally for global wheat prices doesn't appear likely, especially when considering the comfortable global ending stocks highlighted in last week's USDA supply-and-demand estimates. In the U.S. cash wheat market, DTN's collected SRW Index came to $4.71 Friday (26 cents under the September Chicago contract); the HRW Index came to $4.75 (17 cents under the September KC contract); the Spring Wheat Index came to $5.04 (28 cents under the September Minneapolis contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub