DTN Before The Bell Grain Comments

Morning CME Globex Update:

Concerns for global wheat and feed grains production have sparked a recent rally in wheat and corn, but that upward momentum may now be fading after Thursday's overheated highs. Soybean futures tested both higher and lower prices overnight, but as trading volume picked up through the morning, the sellers definitely took control.

Other Markets:

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

Corn:

Corn futures prices started to sink lower during early Friday trade as the recent upward correction in the row-crop markets seems to be losing momentum. Economists and investors may still feel optimistic about the overall economy Friday, with the July jobs report showing signs of increasing wages and steady labor force participation, but fewer jobs added than many were expecting. The stock market may hang in there within 1% of its July high. Hot weather in Europe and Russia hasn't helped their feed grains production prospects, and now hot weather in the U.S. forecast may challenge ongoing pollination and ultimate corn yields from the world's Number 1 corn supplier: the United States. The DTN National Corn Index, an average of cash bids around the country, was $3.36 Thursday, showing a national average basis weaker at 31 cents under the September futures contract. Also, USDAreported a sale of 130,000 metric tons of optional origin corn to Vietnam.

Soybeans:

Although most Midwestern soybeans look great at the beginning of August, and the aggregate U.S. production expectations are still large in 2018, those areas that are dry (Kansas, Missouri, southeast Iowa, pockets of Indiana, and Michigan) are starting to show stress to the soybeans, and the weekend weather forecast suggests dry conditions or just a few light showers. For now, the new-crop November futures chart doesn't show any bullish concern about this, and instead is lingering under the $9 level. Soybean basis bids at the Gulf are only about 50 cents over futures, so without much of an export market shaping up yet in the August to September timeframe, Midwestern processors are bidding roughly 50 cents under November futures for August to September delivery, and the average country basis bid was still 78 cents under the November futures contract Thursday. The DTN National Soybean Index came to $8.19 per bushel.

Wheat:

Since their July 2 lows, Kansas City wheat futures representing HRW wheat have rallied 27% to reach Thursday's highs, but U.S. wheat futures are losing ground amid heavy selling interest Friday morning. European wheat prices are also moving lower, not retesting the panicky high reached Thursday when Ukraine's ag minister erroneously suggested exports would be restricted (they still won't be abundant). In the U.S. Northern Plains where spring wheat harvest is heating up, cash wheat merchandisers are definitely pushing back against the higher Minneapolis futures prices, consistent with their expectations of at least 20% more spring wheat bushels than last year, due to increased acreage, if not much increased yield. The December to March futures spread is moving wider this week, and average spring wheat basis weakened again Thursday by 3 cents, to 45 cents under the September Minneapolis contract, bringing the Spring Wheat Index to $5.65. The HRW Index was $5.51 per bushel or 18 cents under the September KC futures contract.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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