DTN Before The Bell Grains

Soybean Losses Drive Sector Lower

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

Morning CME Globex Update:

In the expectation of overwhelming soybean supplies in the 2018/19 marketing year, commercial futures traders are still widening the soybean futures spreads, weakening the soybean basis bids, and driving soybean futures prices lower by double digits Monday morning. The grains, with their own supply bearishness, are following along.

Other Markets:

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

Corn:

Corn prices have slipped farther downward Monday, mostly following the steeper losses in the soybean market, but also expressing the corn market's own supply bearishness. Some heavy rain totals were seen across the heart of the Corn Belt and even in dry Michigan over the weekend, which is favorable to the late grain-filling stage of the crop. This week's upcoming forecast is also favorable to filling crops in the Midwest, but there are regions in the western Corn Belt where corn fields are getting stressed and there is too little rain in the forecast to improve their prospects. It's possible that deteriorating condition ratings in those western states could cause the overall nationwide condition ratings to slip somewhat in Monday afternoon's upcoming Crop Progress report. The DTN National Corn Index, an average of cash bids around the country, was $3.16 Friday, showing national average basis steady at 32 cents under the September futures contract.

Soybeans:

Steep double-digit losses in soybean futures overnight brought the November contract within 14 cents of its July low. The Brazilian real has been freefalling recently, which allows global soybean prices to move lower in tandem, but the currency is finally experiencing some support during Monday's trade. Without export bullishness at this critical time of year, some brutal soybean basis bids are getting passed back to local elevators and producers. In the Mississippi Delta, flat prices for soybeans are less than $8 per bushel, and in the northwestern regions of the Corn Belt, there are cash bids with a $6 as the first digit. Confident there will be oodles of leftover soybean inventory in the 2018/19 marketing year (785 million bushels projected in the latest WASDE report), Midwestern soybean processors have no need to push stronger basis bids without export competition, and are generally buying soybeans at 50 to 60 cents under the November futures price. The DTN National Soybean Index showed nationwide average basis bids weaker again on Friday, now 91 cents under the November contract, or $7.64 expressed as a flat price.

Wheat:

Helpful rain fell over the weekend in the extremely droughty eastern regions of Australia, which could help winter wheat fields that are currently in the grain-fill stage. U.S. wheat futures continue to the day-to-day prospects of global wheat availability, so the bearishness of rain in Australia has sent these prices downward Monday. The CFTC has shown that 'managed money' speculators spent the week leading up to last Tuesday selling off long futures and options positions and adding to short positions now that the peak of the European wheat rally appears to be behind us. DTN's collected SRW Index was $4.86 Friday, (average basis still at 29 cents under the September Chicago futures contract); the HRW Index was $5.00 (still 19 cents under the September KC contract); and the Spring Wheat Index was $5.24, with a steady but still relatively weak harvest-time basis of 49 cents under the September Minneapolis contract. Monday afternoon's Crop Progress report will likely show spring wheat harvest is nearing completion in the Northern Plains and past the halfway mark in the northwest.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub