DTN Before The Bell Grains

Grain Markets Bearishly Anticipate More Rain

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

Morning CME Globex Update:

Generally favorable yield estimates and a forecast for rain across the central Corn Belt to boost late-season grain fill are giving the row crop markets a bearish tone Wednesday morning, but there is potential this week for sudden changes if hints about better trade conditions filter through to the markets and/or if fresh speculative money enters the market. The Brazilian real has fallen 10 percent over the past two weeks, bearish to global soybean prices.

Other Markets:

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

Corn:

Corn futures continued to drift lightly lower Wednesday morning while there is a favorable amount of rain in the forecast for most of the Corn Belt later this week. The stock market, as measured by the S&P 500 Index, touched an all-time record high Tuesday, but didn't close there. Crude oil prices seem to also be rising on this strong economic outlook, but so far, there hasn't been any huge flurry of new wealth being directed into commodity futures. However, the corn market does benefit from higher energy prices via the strength of global ethanol demand, and U.S. ethanol production has consistently exceeded 1 million barrels per day since April. That demand underpins the cash market, where the DTN National Corn Index, an average of cash bids around the country, was $3.28 Tuesday, showing national average basis steady at 31 cents under the September futures contract.

Soybeans:

Soybean prices remained lower all through the overnight trading timeframe, but have the potential to streak in either direction over the next couple of days if any hints float out of the meetings with Chinese trade officials in Washington, D.C. This week's meetings aren't expected to solve any problems just yet, but tariffs are still the number one issue that can make soybean futures excitable, even from hints and hopes. Brazil's currency, the real, is nosediving to its cheapest level since January 2016, which allows global soybean prices to soften. American farmers who get out into individual fields this time of year to count corn kernels and soybean pods are generally confirming the futures market's expectations for a large row crop harvest in 2018, although perhaps smaller than the USDA's latest yield projections suggested. Meanwhile in the old crop cash market, bids for soybeans at the Gulf of Mexico continue to slacken while the U.S.-China trade war remains officially "on," and those weak bids get passed back to country elevators. The DTN National Soybean Index was $8.02 Tuesday, weaker now at 84 cents under the November futures contract.

Wheat:

Although the dry Pacific Northwest region would no doubt appreciate some rain, their dry forecast through Sunday should allow the 2018 U.S. winter wheat harvest to get all finished up. The Southern Plains are equally in need of moisture to recharge their droughty soil before winter wheat planting, and they are actually likely to receive some more over the next few days. The day-to-day direction of wheat futures prices, however, remains sensitive to the global production and export prospects. The market is still exploring how far to pull back off the European milling wheat market's panicky high from August 2nd. In the U.S. cash wheat market, DTN's collected SRW Index was $4.99 Tuesday, (average basis still at 28 cents under the September Chicago futures contract); the HRW Index was $5.15 (20 cents under the September KC contract); and the Spring Wheat Index was $5.39, 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