DTN Before The Bell Grain Comments

Spring Wheat Leads Morning Gains

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

Morning CME Globex Update:

Row crop futures have started the week with very quiet trade and could easily slip into losses as the morning wears on. Last week's bounce remains vulnerable to additional export bearishness or expectations of a bearish weekly Crop Progress report coming Monday afternoon.

Other Markets:

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

Corn:

Trading volumes have been notably very light at the start of Monday's trading session as traders come back from a summer weekend and wait for the row crop markets to develop a direction. Outside markets will be seen as supportive, with the dollar softening and crude oil bouncing upward. Friday's Cattle on Feed report showed the total U.S. cattle population still growing at more than 1 percent per year, but the number of market animals on feed as of July 1 was 13.3 million head, or 4 percent more than last year at this time. This was widely expected by cattle traders, but for the feed grains market, it's another reminder of the strong domestic demand that underpins prices. The DTN National Corn Index, an average of cash bids around the country, was $3.26 Friday, showing national average basis to be steady at 30 cents under the September futures contract.

Soybeans:

Soybean futures are lightly higher alongside wheat and corn, perhaps in preparation for declining crop condition ratings in the weekly Crop Progress report. The D3 Extreme Drought has been expanding in northern Missouri and isn't getting much better this week, with mostly sunshine in the forecast. The late July weather is more important in 2018 than usual for soybeans, as the weekly Crop Progress report might show nearly half of U.S. soybean fields are already setting pods and will greatly benefit from having adequate soil moisture and pleasantly warm temperatures across most of the Midwest. The cloud of trade tensions with all our most important trading partners (China, Canada, Mexico, Europe) continues to linger over many U.S. markets and could limit the extent of the soybean chart's recent bounce. On Friday, nationwide average soybean basis remained steady at 60 cents under the August contract, bringing the DTN National Soybean Index to $7.89 per bushel. At 8 a.m. USDA reported Chinacanceled 165,000 mt of soybeans set for delivery in 2018-2019.

Wheat:

Double-digit gains in high-protein spring wheat destined for the milling market, represented by Minneapolis wheat futures, are leading the higher movement across the grains sector Monday morning. Japan has resumed importing Canadian wheat after a GMO kerfuffle, which is bullish for Canadian wheat demand, and hot and dry weather continues in the Canadian prairies, which is bullish in regard to estimated 2018 Canadian wheat production and ending stocks. European milling wheat futures continue to surge higher Monday, with gains equivalent to 7 U.S. cents per bushel, after bursting through previous resistance levels on their December chart last week. Arbitrage will allow U.S. wheat prices to also move higher alongside those gains, but more bearish supply ideas in this country should limit the response. 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 $4.89 (still 27 cents under the September Chicago contract); the HRW Index came to $4.93 (still 16 cents under the September KC contract); and the Spring Wheat Index came to $5.24 (now 31 cents under the September Minneapolis contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub