DTN Early Word Grains

Grains Lower With Rain on the Way

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

December corn was down 2 cents, November soybeans were down 6 1/2 cents, and September Chicago wheat was down 5 3/4 cents.

CME Globex Recap:

Major stock markets are mostly lower early Wednesday and commodities are nearly all lower as one of the few consistent themes this summer has been the expectation of higher interest rates. The grain sector is lower with widespread rains expected over the eastern two-thirds of the U.S.

OUTSIDE MARKETS:

Previous closes on Tuesday showed the Dow Jones Industrial Average down 125.44 points at 25,187.70 and the S&P 500 down 11.35 points at 2,821.93 while the 10-year Treasury yield ended at 2.88%. Early Wednesday, DJIA futures were down 112 points. Asian markets are lower with Japan's Nikkei 225 down 151.86 (-0.7%) and China's Shanghai Composite down57.71 (-2.1%). European markets are lightly lower with London's FTSE 100 down 24.94 points (-0.3%), Germany's DAX up 8.61 points (0.1%), and France's CAC 40 down 5.92 points (-0.1%). The euro was down .0015 and the U.S. dollar index was up 0.17 at 96.83. September 30-year T-Bonds were up 7/32nds while December gold was down $7.70 at $1,193.00 and September crude oil was down $0.98 at $66.06. Soybeans on China's Dalian Exchange were a little higher and Malaysian palm oil futures were down 0.8%.

BULL BEAR
1) December soybean meal erased Friday's big loss in two sessions with help from commercial buying and slightly bullish news that Argentina will suspend export tax reductions. 1) USDA estimated a record U.S. soybean crop and record corn yield on Friday.
2) IGC and USDA both estimate significant reductions in exportable world ending stocks of corn and wheat in 2018-19. 2) Futures spreads suggest bearish near-term demand for corn, soybeans, and all three wheats.
3) Wednesday's seven-day forecast is wetter, but still not expecting much rain in the northwestern U.S. or the western Canadian Prairie. 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 down 2 cents with scattered showers in Iowa and Missouri early Wednesday and more on the way. The seven-day forecast expects broad rain coverage east of the Rocky Mountains with the heaviest amounts from northern Arkansas to the Ohio River. Moderate temperatures are also a part of the mix and will be mostly favorable for row crop development. Wednesday will bring another update of ethanol production and so far this year, production has been stable at a high level in spite of concerns about EPA waivers. With another big corn crop expected this fall, December corn prices remain under pressure in a sideways range. Demand however, is expected to stay active and should provide support at these current levels.

SOYBEANS November soybeans are down 6 1/2 cents early, also facing a favorable forecast of moderate temperatures and widespread rains the next seven days. Tuesday's soybean prices got a nice lift from commercial buying in soybean meal, one of the few bullish features that has helped stabilize soybean prices during a bearish summer for prices. The National Oilseeds Processors Association will release its next estimate of U.S. soybean crush for July and the pace should be high again as the crush incentive remains rewarding. With USDA estimating another record U.S. soybean crop on the heels of a record Brazilian soybean crop, November soybean prices are likely to remain under pressure through harvest. Crush demand and commercial buying in soybeans near their lowest level in nine years is helping provide support while the future of trade with China remains a wildcard.

WHEAT September Chicago wheat is down 5 3/4 cents early with lots of rain headed to winter wheat areas the next seven days. The moisture will be especially helpful to the next crops in the southwestern U.S. Plains where conditions are still dry and planting is roughly a month away. The U.S. spring wheat crop got a good start this year, but more recently, conditions have been dry in the northwestern Plains and are expected to remain so for at least the next ten days. December milling wheat is slightly lower early Wednesday and down from last week's peak, but still near its highest prices in four years. USDA's estimate for lower ending wheat stocks in 2018-19 should help support wheat prices at a higher level in the year ahead, but the highs of early August may be the peak of 2018. Technically, 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: $3.31 $0.06 -$0.31 Sep $0.001
Soybeans: $8.01 $0.14 -$0.78 Nov $0.028
SRW Wheat: $5.14 $0.08 -$0.28 Sep -$0.006
HRW Wheat: $5.26 $0.05 -$0.20 Sep -$0.001
HRS Wheat: $5.47 $0.03 -$0.49 Sep $0.000

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

Todd can be followed throughout the day on Twitter @ToddHultman1

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Todd Hultman