DTN Closing Grain Comments

Soybeans Lead Grains Lower After USDA Sees Record Crop

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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(DTN illustration by Nick Scalise)

General Comments:

Corn closed down 11 1/2 cents in the September contract and was down 11 cents in the December. Soybeans closed down 42 1/4 cents in the September and were up 42 1/4 cents in the November. Wheat closed down 17 3/4 cents in the September Chicago, down 18 3/4 cents in the September Kansas City, and was down 21 cents in the September Minneapolis. The September U.S. dollar index is up 0.87 at 96.23. December gold is down $0.90 at $1,219.00 while September silver is down 15 cents and September copper is down 0.0240. The Dow Jones Industrial Average is down 266 points at 25,243. September crude oil is up $0.86 at $67.67. September heating oil is up $0.0293 while September RBOB gasoline is up $0.0377 and September natural gas is down $0.013.

For the week:

September corn closed down 12 cents and December was down 12 1/2 cents. September soybeans were down 40 3/4 cents while the November was down 40 1/2 cents. September Chicago wheat was down 9 1/2 cents, September Kansas City wheat was down 7 1/2 cents, and September Minneapolis wheat was down 4 cents.

CORN:

December corn fell 11 cents to $3.71 3/4 after USDA estimated a larger-than-expected corn crop of 14.586 billion bushels, based on a record yield of 178.4 bushels per acre. After increases in new-crop estimates of feed demand and exports, USDA estimated U.S. ending corn stocks at 1.684 billion bushels for 2018-19 or 11.2% of annual use. Largely because of the increase in U.S. production, USDA's estimate of world ending corn stocks increased from 151.96 million metric tons to 155.49 mmt (6.12 bb), but is still down 20% from the previous year. Friday's report has a 90% confidence interval of plus or minus 11.5%, so no one is saying corn is in the bin yet, but it sets a tone of bearish expectation while weather is still an active influence on crops. For now, the trend in December corn is sideways with weather risk active and world demand still a source of support. DTN's National Corn Index closed at $3.38 Thursday, up from its lows in 2018 and 31 cents below the September contract. In outside markets, the September U.S. dollar is up 0.87, offering a safe haven to investors spooked by Turkey's recent financial problems as the U.S. turned up the tariff pressure. September crude oil is trading up 86 cents after China removed U.S. oil from its list of new tariffs set for August 23.

Soybeans:

November soybeans tumbled 42 1/4 cents lower to $8.61 3/4 after USDA estimated a record high soybean crop of 4.586 billion bushels, based on a higher-than-expected yield of 51.6 bushels an acre. Small increases were made to crush and export demand estimates in both, old- and new-crop seasons. USDA's higher 785 million bushel estimate of U.S. ending soybean stocks for 2018-19 puts the new stocks-to-use ratio at 18.4%, which is the highest since 2006-07. Due mainly to the larger U.S. crop, USDA's estimate of world ending soybean stocks was also increased, from 98.27 mmt to 105.94 mmt (3.89 bb). In addition to expecting another big fall crop in 2018, demand for U.S. soybeans continues to be a concern while the U.S. and China trade tariffs. Early Friday, USDA said 7.7 million bushels (210,000 mt) of U.S. soybeans were sold to unknown with 2.9 million bushels (80,000 mt) for 2017-18 and the rest for 2018-19. With USDA estimating a record soybean crop this fall and U.S. trade policy currently bearish for soybeans, the fundamental outlook is bearish, but prices are already historically cheap. The challenge here is that trade policy could change unexpectedly and weather concerns are still active in August. After Friday's lower close, the trend in soybeans is sideways with volatile factors in play. DTN's National Soybean Index closed at $8.23 Thursday, up from its lowest price in over nine years and priced 81 cents below the November contract. In August contracts, delivery intentions totaled 337 for soybeans and 186 for soybean oil early Friday. There have been no delivery intentions yet for soybean meal.

Wheat:

September Chicago wheat closed down 17 3/4 cents at $5.46 3/4, influenced by corn and in spite of roughly neutral numbers in USDA's latest WASDE report. For the U.S., USDA reduced its estimate of ending stocks for 2018-19 from 985 million to 935 million bushels, which was a little less than expected. USDA reduced its estimate of world ending wheat stocks for 2018-19 from 260.88 mmt to 258.96 mmt (9.52 bb), which was a smaller drop than expected with several details to know. The main change was a 7.5 mmt drop in Europe's crop estimate to 137.5 mmt (5.05 bb). That would have been more bullish, but USDA also increased Russia's crop by 1 mmt and reduced its estimate of world demand by 5.1 mmt so much of Europe's news was offset. Here in the U.S., production estimates did not change much and the spring wheat crop estimate stayed at 614 million bushels. Ending stocks of the top seven exporters fell from 51.31 mmt to 49.9 mmt (1.83 bb) in August, the lowest since 2007-08. In spite of Friday's lower closes, the trends for all three U.S. wheats remain up. DTN's National SRW index closed at $5.36 Thursday, 29 cents below the September contract and down from its high in 2018. DTN's National HRW index closed at $5.58 Thursday, down from its highest price in 2018.

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

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Todd Hultman