DTN Before The Bell Grains

Commodity Sell-Off Continues

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

Morning CME Globex Update:

Grain and oilseed markets are still reeling from Friday's supply-and-demand report from the USDA, which bearishly suggested both domestic and global ending stocks will be larger in the 2018-19 marketing year than most traders were expecting to see, especially considering some recent weather concerns. The U.S. dollar experienced a wild overnight trading session, but is continuing higher Monday morning, bearishly influencing dollar-denominated commodity prices.

Other Markets:

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

Corn:

The carnage continues Monday after Friday's grain market massacre following the monthly WASDE report, which surprised traders with larger-than-expected ending stocks projections for both the United States and the world in the 2018-19 marketing year. A larger U.S. production estimate, at 178.4 bushels per acre and a 14.6 billion-bushel crop, drove up global supplies, while notably the USDA trimmed European coarse grains production but bumped up the figure from Ukraine. The new crop December corn futures contract is trading about 20 cents below its recent high but is still 17 cents away from its July low. Meanwhile, OPEC released a monthly supply and demand report, too, Monday morning, which suggested global demand may slip in 2019 and adds to the overall bearish tone of commodity trade Monday morning. The DTN National Corn Index, an average of cash bids around the country, was $3.26 Friday, showing national average basis weaker at 32 cents under the September futures contract. At 8 a.m. USDA reported 213,372 mt of corn sold to Mexico, 142,248 mt for 2018-2019 and 71,124 mt for 2019-2020.

Soybeans:

If the outside markets weren't also exerting stiff bearish pressure on the commodity markets Monday morning, soybean futures might have a chance of recovering some of Friday's losses while traders note the ongoing depletion of soil moisture across large patches of the Corn Belt during the soybean crop's critical pod-filling stage. Southern Iowa, Michigan, and the northern Mississippi Delta were mostly missed by rains over the weekend and shouldn't expect much from the near-term forecast. Tuesday will be the last trading day for August soybeans, soybean meal, and soybean oil futures contracts. The DTN National Soybean Index came to $7.81 Friday, showing average basis bids steady at 81 cents under the November futures contract. Compared to what would be "normal" for this time of year, basis bids at the Gulf, at Midwestern processors, and at country elevators are all depressed by 20 to 30 cents, ostensibly due to the tariff situation and resulting dearth of upcoming export business. At 8 a.m. USDA reported 142,500 mt soybeans sold to Mexico for 2018-2019.

Wheat:

USDA gave a nod to the underlying justification behind the recent global wheat rally by trimming their August WASDE wheat production estimates 5 percent out of Europe, but curiously leaving wheat production unchanged from Ukraine, Canada, and Australia (and bumping up Russia's number). The net result of this, alongside the weaker feed grain prices and overall meltdown in grain futures trade, is another day of double-digit losses for wheat futures contracts Monday morning. Given the recent stretch of dry weather in the Northern Plains, U.S. spring wheat harvest may approach 40 percent complete in Monday afternoon's Crop Progress report. DTN's collected SRW Index was $5.18 Friday, showing steady basis at 29 cents under the September Chicago futures contract; the HRW Index was $5.40 (steady at 20 cents under the September KC contract); and the Spring Wheat Index was $5.60, with a steady but still relatively-weak harvest-time basis of 49 cents under the September Minneapolis contract.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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Elaine Kub