DTN Early Word Grains

Grains Mixed Ahead of 11 a.m. CDT USDA Report

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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6:00 a.m. CME Globex:

December corn was up 1/4 cent, November soybeans were down 3 3/4 cents, and September Chicago wheat was up 2 cents.

CME Globex Recap:

Stock markets in Japan and Europe are lower early Friday with fresh concerns about Turkey's economy and its falling currency adding to previous concerns of rising tariffs and trade disputes. There is also a flight to safety among investors as the U.S. dollar and U.S. Treasury bonds are trading higher. Most commodities are mixed on this big report day for grains -- the first one without a lockup room for the media.

OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average down 74.52 points at 25,509.23 and the S&P 500 down 4.12 points at 2,853.58 while the 10-year Treasury yield ended at 2.93%. Early Friday, DJIA futures were down 101 points. Asian markets are mostly lower with Japan's Nikkei 225 down 300.31 (-1.3%) and China's Shanghai Composite up 0.93 (0.03%). European markets are lower with London's FTSE 100 down 58.49 points (-0.8%), Germany's DAX up 212.71 points (-1.7%), and France's CAC 40 down 70.15 points (-1.3%). The euro was down .0085 and the U.S. dollar index was up 0.43 at 96.04. September 30-year T-Bonds were up 23/32nds while December gold was down $2.50 at $1,217.40 and September crude oil was down $0.05 at $66.76. Soybeans on China's Dalian Exchange were steady to higher and Malaysian palm oil futures were down 0.1%.

BULL BEAR
1) Still not much rain in Thursday's seven-day forecast for the western and northern Midwest. Also looking at three days of hot temperatures in the western Plains and northwestern U.S. 1) There is a chance USDA will estimate a record soybean crop and a record corn yield in Friday's report.
2) IGC and USDA both estimate significant reductions in exportable world ending stocks of corn and wheat in 2018-19. 2) There is a chance USDA will estimate a record soybean crop and record corn yield in Friday's report.
3) USDA is likely to reduce its estimate of 2018-19 world wheat production in Friday's WASDE report. 3) China's 25% soybean tariff and ongoing trade war show no sign of letting up yet.

MORE COMMODITY-SPECIFIC COMMENTS

CORN December corn is up 1/4 cent early Friday, staying true to form of not showing much movement ahead of USDA's 11 a.m. CDT WASDE report. Again, this is the first time in 2018 that USDA will offer a yield estimate based on field surveys, and the tradition of this report is that it has often surprised traders with its findings. Dow Jones' survey expects USDA to estimate 14.42 billion bushels (bb) of corn production, based on a yield of 176.3 bushels per acre (bpa), and increasing U.S. ending stocks to 1.63 bb in 2018-19. Given this year' crop conditions are supposedly rating higher than a year ago, one could assume the yield should be above last year's record high 176.6 bpa, but that is the kind of guessing that will end at 11 a.m. CDT. For now, the downtrend in December corn has been broken, and prices are exploring a sideways trading range while traders continue to assess this year's crop.

SOYBEANS November soybeans are down 3 3/4 cents early Friday as Dow Jones' survey expects USDA to estimate a record high 4.43 bb soybean crop later Friday, based on a yield of 49.8 bpa, and increasing the estimate of U.S. ending stocks to 641 million bushels (mb) for 2018-19. As mentioned for corn above, this is a difficult report to outguess and we have seen big price reactions to the August WASDE report of three of the past five years. Given this year's weather, it seems more likely that any surprise would be bearish to prices, rather than bullish, but again, these are guesses that become irrelevant at 11 a.m. CDT. The larger problem for soybeans is that even after the report is released, there is still this problem of a trade dispute with the world's largest soybean buyer and that does not seem to be going away anytime soon. For now, the downtrend in soybeans has been broken, but predicting a future direction is a tough while trade policy decisions could swing abruptly in either direction.

WHEAT September Chicago wheat is up 2 cents early, helped by slightly higher trading in Europe and expectations for a lower estimate of world wheat production in Friday's WASDE report. Dry weather concerns in several wheat regions have gradually increased through the season and came on strong the past month in Europe, sending European milling wheat prices to their highest level in four years. Here in the northwestern U.S. and western Canadian Prairies, spring wheat crops are getting a late hit of hot and dry weather that is also stressing crops. Futures spreads in wheat have not shown any sign of increased demand yet and neither have U.S. exports, but there is a concern that the world's exportable supplies of wheat will be much less available in 2018-19. With USDA likely to give lower crop estimates on Friday, the trends for all three wheats remain up.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.38 -$0.02 -$0.31 Sep -$0.001
Soybeans: $8.23 -$0.07 -$0.81 Nov -$0.006
SRW Wheat: $5.36 -$0.06 -$0.29 Sep -$0.009
HRW Wheat: $5.58 -$0.06 -$0.20 Sep -$0.006
HRS Wheat: $5.81 -$0.04 -$0.49 Sep -$0.006

Todd Hultman can be reached at todd.hultman@dtn.com

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Todd Hultman