DTN Before The Bell Grain Comments

Grains Still Bouncing

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

Morning CME Globex Update:

Wheat prices are being pulled higher by a bullish surge on the European milling wheat chart, but all the grain and oilseed markets would probably be pursuing an upward direction Friday, anyway, given the supportive lower U.S. dollar and the week-long willingness of traders to buy these markets at bargain prices.

Other Markets:

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

Corn:

Lightly higher prices for the row crops Friday morning sustain the corrective upward bounce these markets have displayed all week. New crop December corn futures are hovering as much as 17 cents above the contract low established earlier this month, and new crop November soybeans are about 39 cents above their contract low, allowing that price ratio to get a little closer to normal (currently 2.36-to-1). The nearby corn futures spread between September and December futures, representing the storage opportunities for corn during that timeframe, has continued growing wider and wider and now on Friday morning shows 14 cents of carry through those last few months of the year. This is a bearish signal about commercial traders' corn supply outlook, likely reflecting an expectation for new crop harvested bushels to show up early in 2018 and start challenging elevators' space requirements. The DTN National Corn Index, an average of cash bids around the country, was $3.21 Thursday, showing national average basis to be steady at 30 cents under the September futures contract.

Soybeans:

While there are areas with way too little moisture (NW Missouri still in D3 Extreme Drought in this week's Drought Monitor), and areas with way too much moisture (SE South Dakota got blasted with more rain on Thursday), one thing the entire Corn Belt shares in common this year is heat. Not necessarily crop-damaging heat, but certainly crop-accelerating heat. From the North Dakota to Pennsylvania, and from Texas to South Carolina, there have been anywhere from 100 to 400 more growing degree days than usual between April 1 and mid-July. This suggests something like 40 percent of soybean fields could already be setting pods, and the soybean futures market must carefully interpret weather forecasts earlier than usual this year. Right now, the 6-10 day forecast is favorable for soybean production, with the exception of those previously-mentioned trouble spots. On Thursday, nationwide average soybean basis remained steady at 60 cents under the August contract, bringing the DTN National Soybean Index to $7.86 per bushel.

Wheat:

European milling wheat futures burst through previous resistance levels on their December chart overnight and are surging higher by almost 2 percent Friday (with gains equivalent to 9 1/2 U.S. cents per bushel). Arbitrage will allow U.S. wheat prices to also move higher alongside those gains, but more bearish supply ideas here in North America should limit the response. In the U.S., Soft Red Winter wheat harvest has encountered high yields in Ohio and Michigan, Hard Red Winter wheat harvest is still pulling good yields out of Nebraska and Colorado, interspersed with a few disappointing fields, and Hard Red Spring wheat harvest is expected to encounter a beautiful, plentiful crop when that gets fired up in the next week or so. Cash wheat merchandisers, therefore, are starting to resist the higher movement in prices by softening their basis bids. DTN's collected SRW Index came to $4.69 (27 cents under the September Chicago contract); the HRW Index came to $4.72(16 cents under the September KC contract); and the Spring Wheat Index came to $4.99 (30 cents under the September Minneapolis contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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Elaine Kub