DTN Before The Bell Grain Comments

Soybean, Corn Traders Shed Short Positions

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

Morning CME Globex Update:

Stock futures moved higher Friday morning after the quarterly GDP number confirmed traders' bullish assessments of the economy, and at 2,843, the S&P 500 Index is starting to approach January's high-water mark. The row crop markets are quiet in comparison, with position-squaring likely to continue through Friday's session. U.S. wheat prices are lower as the European price rally appears to be pulling back off Thursday's peak.

Other Markets:

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

Corn:

Outside markets are likely to spend Friday morning in a cheerful mood, after the quarterly GDP figure showed the U.S. economy expanding at an annual rate of 4.1 percent. That shows an acceleration from the previous quarter (2.2 percent), but isn't quite as fast as some traders were hoping to see. Stronger energy prices could influence corn prices during the trading session, after they spent a mild night trading both lightly higher and lightly lower. Position squaring is always likely on the last Friday of a month, and speculative 'managed money' traders have previously been holding 1.6 times more short corn futures positions than long positions, so it's possible that short covering activity could boost prices Friday. The DTN National Corn Index, an average of cash bids around the country, was $3.32 Thursday, showing national average basis steady at 29 cents under the September futures contract. At 8 a.m. USDA reported 270,000 mt of corn were sold to unknown destinations for delivery in 2018-2019.

Soybeans:

Total open interest in soybean futures has been falling during this week's trading sessions, suggesting the recent upward movement has been the result of short covering now that the tariff losses appear to be priced in. Areas in the Southern Plains and the southern half of the Corn Belt are expected to receive some shower activity over the weekend and into next week, but that leaves a lot of farmers in the heart of the Corn Belt and the northern growing regions who would really like some rain, soon, to assist the soybean plants as they bloom and fill pods. If the long-term forecast started to turn hot for the Midwest, or if soybean condition ratings start to fall, it's possible that the upward movement on the new crop futures charts could change from just being a corrective bounce into a sign of actual mid-season weather bullishness. Friday July 27 is the expiration date for August options on grains and soybeans, soybean oil, and soybean meal. On Thursday, nationwide average soybean basis remained steady at 61 cents under the August contract, bringing the DTN National Soybean Index to $8.00 per bushel. At 8 a.m. USDA reported 154,100 mt ofsoybeans were sold to unknown destinations for delivery in 2018-2019.

Wheat:

Results from the Wheat Quality Council's Spring Wheat Tour this week suggest yields may be only 3 bushels per acre better than last year, and therefore not quite the massively abundant crop the market predicted during the improving Northern Plains weather of July. Meanwhile, the frantic rally in Euronext milling wheat futures has quieted down after peaking on Thursday. It's unclear how much of the bullishness for scarce European and Russian milling wheat will translate into new export demand for U.S. hard wheat varieties. That uncertainty can be seen in the wildly shifting Minneapolis wheat futures spreads. At one point this week, the December-to-March spread collapsed to only 5 1/2 cents during a rapid bout of speculative short covering, but on Friday morning, the spread has renewed its bearish message. At 16 1/2 cents, it suggests that commercial wheat traders anticipate ample supplies to be stored in bins and elevators. The message is also echoed through ever-weakening basis bids. The nationwide average spring wheat basis has weakened 8 cents over the past week, counteracting some of the 30-cent futures gains, and is now 38 cents under the September Minneapolis contract, bringing the DTN Spring Wheat Index to $5.50 per bushel Thursday. DTN's collected SRW Index came to $5.08 (28 cents under the September Chicago contract); the HRW Index came to $5.18 (16 cents under the September KC contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub