DTN Before The Bell Grains

Soybeans Respond to Bullish Hints

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

Morning CME Globex Update:

Meetings with a Chinese trade envoy have been scheduled in the U.S. later this month, according to media reports Thursday morning, which will offer a glimmer of bullish hope to the soybean market. Grain and oilseed prices were already higher overnight alongside broad commodity gains and improved expectations for the stock market and overall economy.

Other Markets:

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

Corn:

The weekly export sales report included a disappointing 339,000 metric tons of old crop corn and an impressive 1.044 million metric tons of new crop corn. It therefore echoed the weekly ethanol production report at 1.072 million barrels per day by showing strong but not wildly bullish demand in the corn market. This is the season for counting kernels and estimating yields, with greater confidence now that the corn crop has matured so quickly. DTN's 2018 Digital Yield Tour, which takes place August 15 -- 20 and includes data analytics from Gro Intelligence, has so far highlighted favorable prospects in Nebraska and South Dakota and stressed crops in Missouri and Kansas. The county-by-county digital yield model predicts Missouri's statewide average corn yield could be only 140.96 bushels per acre after the droughty summer. Outside markets are bullish for the grains Thursday morning, with the dollar dipping and green on the screen for almost all commodities. The DTN National Corn Index, an average of cash bids around the country, was $3.30 Wednesday, showing national average basis stronger at 31 cents under the September futures contract.

Soybeans:

Double-digit gains in soybeans Thursday morning allow the market to regain a more neutral, sideways path, but prices are still about 30 cents below their pre-WASDE report level. Canola prices and Malaysian palm oil prices are also moving upward Thursday. Wednesday's NOPA Crush showed extremely strong domestic demand amid favorable crush margins, with 167.733 million bushels of soybeans crushed in July. But in contrast, this week's export sales report showed a paltry 133,400 metric tons of old crop soybean sales (netted after 208,500 metric tons of reductions) and a fairly lackluster 571,600 metric tons of new crop sales. The DTN National Soybean Index came to $7.87 Wednesday, showing average basis bids at 82 cents under the November futures contract. Compared to what would be "normal" for this time of year, basis bids are depressed by 20 to 30 cents, ostensibly due to the ongoing tariff situation with China, and August Gulf bids dipped another nickel this week. There are now at least talks scheduled with a Chinese trade envoy later this month, according to the media reports Thursday morning, which offers a ray of hope for the soybean market. Brazil's soybeans have been getting about a 20 percent premium over U.S. supplies, but given their unusually fast pace of business in recent weeks, they likely have fewer than 20 million metric tons of old crop soybeans left to offer the market. At 8 a.m. USDA reported 154,404 mt of soybeans sold to Mexico for delivery in 2018-2019.

Wheat:

Global wheat prices on various futures exchanges have all pulled back 5 to 7 percent off the frantic highs from two weeks ago, but the markets' willingness to move higher Thursday, as well as the stable futures spreads into 2019, demonstrate that the wheat market's burst was more than just a short-term bubble. Locking in supplies of milling-quality wheat could be a challenge for some global consumers through the next twelve months. This week's export sales report suggested the U.S. wheat market is already benefitting from that search, with a marketing year high of 803,000 metric tons of net sales, including steady interest from Mexico and a good chunk of business from Nigeria. DTN's collected SRW Index was $5.05 Wednesday, (average basis at 27 cents under the September Chicago futures contract); the HRW Index was $5.16 (20 cents under the September KC contract); and the Spring Wheat Index was $5.35, with a steady but still relatively-weak harvest-time basis of 49 cents under the September Minneapolis contract. At 8 a.m. USDA reported 200,000 mt of HRW sold to Iraq for delivery in 2018-2019.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub