DTN Before The Bell Grains

Grain Markets Lower Despite Demand

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

Morning CME Globex Update:

Virtually the entire commodity sector is experiencing lower prices Thursday morning, and grains were no exception even after a favorable weekly export sales report for the row crops: 1.228 million metric tons of total corn sales and 1.301 million metric tons of total soybean sales.

Other Markets:

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

Corn:

Bit by bit, the small daily losses in the corn market have accumulated and now the new crop December chart has dipped past last week's $3.66 low, with the next low spot on the chart not seen until the $3.50 1/4 from July 12. U.S. 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, with better yields than last year although perhaps smaller than the USDA's latest yield projections suggested. The weekly export sales report showed a hefty 1,054,600 metric tons of corn sales for the 2018/19 marketing year alone. That demand helps to underpin the cash market, where the DTN National Corn Index, an average of cash bids around the country, was $3.21 Wednesday, showing national average basis at 32 cents under the September futures contract.

Soybeans:

Ever-wider soybean futures spreads (with over 25 cents of carry now available between November 2018 and March 2019) suggest commercial traders are anticipating uncomfortably large soybean supplies sitting in bins without anywhere to go, although this week's export sales report showed a bullish 1,148,600 metric tons of new crop sales being put on the books. Recent weakness in the Brazilian real (down more than 10 percent over the past 2 1/2 weeks) has been bearish to global soybean prices, but the slide seems to be taking a pause Thursday. Anxious, choppy trade in Brazil may continue as their October presidential election approaches and more than 30 percent of polled voters support Lula da Silva, who is currently sitting in jail for corruption. Meanwhile in the U.S., bids for soybeans at the Gulf of Mexico continue to slacken while the U.S.-China trade war escalates with another $16 billion worth of goods starting to be hit with tariffs Thursday (industrial goods, fuel, medical equipment, and of course, the soybean tariff is still in place) even while Chinese trade officials are meeting with the U.S. in Washington, D.C. to outline future negotiations. Those weak export bids get passed back to country elevators, and the DTN National Soybean Index was $7.84 Wednesday, showing average basis two cents weaker than the day before, now 86 cents under the November futures contract.

Wheat:

Minneapolis wheat futures were a rare flash of green on grain trading screens as Thursday morning trade proceeded, with the December spring wheat futures contract appearing to find support above $6.00 per bushel. Almost all other commodities, including cotton, canola, crude oil, and the precious metals are lower Thursday morning while investors worry about the stability of the global economy, despite a record-long bull run in the U.S. stock market. In the U.S. cash wheat market, the export sales report showed a paltry 239,800 metric tons of wheat business, but there is some optimism this week about a happier NAFTA trade relationship with Mexico, which would be positive to wheat and other ag markets. DTN’s collected SRW Index was $4.97 Wednesday, (average basis weaker at 29 cents under the September Chicago futures contract); the HRW Index was $5.11 (19 cents under the September KC contract); and the Spring Wheat Index was $5.38, with a still relatively weak harvest-time basis of 48 cents under the September Minneapolis contract.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub