DTN Before The Bell Grains

Grain Markets Confident About Supply

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

Morning CME Globex Update:

Morning futures trade has been extremely thin, with most of the day's activity likely to take place after some expected headlines arrive, showing the Fed's economic outlook and the USDA's plan for tariff aid. During a timeframe when new crop harvest prospects can be confidently observed out in the fields, the row crop futures markets have unsurprisingly shifted lower through the week so far.

Other Markets:

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

Corn:

Corn futures trade was extremely quiet Friday morning, with sellers unwilling to extend Thursday's losses past $3.60 1/2 on the December chart. NAFTA talks between the U.S. and Mexico may come to a promising result as soon as Friday, which could boost confidence about the foreign demand for corn and for some domestic corn consumers (i.e. livestock). The monthly Cattle on Feed report Friday afternoon is expected to show big numbers: the average analyst estimate is 104.4 percent as many animals being fed August 1 2018 than on August 1 2017. Meanwhile, U.S. corn farmers who get out into individual fields this time of year to count kernels are generally confirming the futures market's expectations for a large harvest in 2018, with better yields than last year although perhaps smaller than the USDA's latest yield projections suggested. The DTN National Corn Index, an average of cash bids around the country, was $3.15 Thursday, showing national average basis steady at 32 cents under the September futures contract.

Soybeans:

Soybean futures are up a few pennies early Friday but down more than 30 cents for the week, and with their recent tendency to develop heavier trading volume and stronger momentum midway through the morning, those results could easily change before the week is done. On Friday, the USDA is expected to announce details about some "tariff aid" for farmers, which may pay extra cash for soybean production and thus have the potential to dramatically interrupt the free market's bidding for 2019 acreage decisions. Remember that the U.S. is expected to end the 2018/19 marketing year with 785 million bushels of leftover soybean inventory. Average country basis bids for soybeans have weakened by 5 cents through this week, matching the bearishness seen all along the rail, barge, and ocean-vessel supply chain. Cumbersome supplies of new crop soybeans are expected to fill up bins in the coming months, with no clear destination during an ongoing trade war with China. The Chinese trade representatives who were in Washington D.C. this week have concluded their meetings without releasing any bullish hints to boost the soybean market. The DTN National Soybean Index was $7.66 Thursday. At 8:00 a.m. USDA reported 146,000 mt of soybeans sold to unknown destinations for delivery in 2018-2019.

Wheat:

All three U.S. wheat futures markets are lower Friday morning, but there is still supportive buying interest underpinning global wheat prices. East Central Australia's rainfall totals this week have so far disappointed the drought-stricken region, but they could get more rain this weekend. A lower U.S. dollar, as was seen overnight, is traditionally supportive to dollar-denominated commodity prices, and wheat futures are usually quite responsive to that factor, but traders may be discounting any dollar movement until a clearer outlook is given in comments by the Federal Reserve chair later Friday morning. DTN's collected SRW Index was $4.93 Thursday, (average basis still at 29 cents under the September Chicago futures contract); the HRW Index was $5.08 (still 19 cents under the September KC contract); and the Spring Wheat Index was $5.33, with a steady but still relatively weak harvest-time basis of 49 cents under the September Minneapolis contract. Spring wheat harvest is nearing completion in the Northern Plains and rounding past the halfway mark in the northwest.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub