DTN Early Word Grains

Wheat Stages Recovery, Row Crops Chop

6:00 a.m. CME Globex:

December corn was up 0.50c, November soybeans were down 1.25c, and December K.C. wheat was up 3.75c.

CME Globex Recap:

Global equity markets are mostly better overnight as spillover support from the US and a breakthrough between Mexico and the United States on trade appears to be happening. Still nothing to speak of on the US/China trade front. The USD has slipped back below its 100 and 200-day moving averages with the 50-day just below at 92.69. Most commodities, including the energy sector are firmer on the forex weakness. Grains are clinging to small gains this morning but the calendar flipping to September will only bring more seasonal weakness.

OUTSIDE MARKETS:

Previous closes on Monday showed the Dow Jones Industrial Average up 259.29 points at 26,049.64 and the S&P 500 up 22.05 points at 2,896.74 while the 10-year Treasury yield ended at 2.851%. Early Tuesday, DJIA futures were up 2.75 points. Asian markets are mostly higher with Japan's Nikkei 225 up 13.83 (0.06%) and China's Shanghai Composite down 2.92 (-0.11%). European markets are higher with London's FTSE 100 up 27.48 points (0.36%), Germany's DAX up 23.08 points (0.18%), and France's CAC 40 up 7.66 points (0.14%). The euro was up 0.00205 at 1.17165 and the U.S. dollar index was down 0.0760 at 94.6820. September 30-year T-Bonds were down 3/32nds while December gold was up $3.50 at $1219.50 and October crude oil was up $0.15 at $69.02. Soybeans on China's Dalian Exchange closed up 0.37%.

BULL BEAR
1) Corn and soybean inspections continue strong and should allow both to meet marketing year export objectives. 1) There is no technical support between spot and contract lows in both corn and soybeans and momentum indicators are not yet diverging from price.
2) CIF bids for both corn and soybeans were steady/firmer Monday with the lower futures board. 2) African Swine Fever concerns persist in China, raising doubts about global soybean demand growth.
3) Several Fibonacci retracement and progression levels are showing up as support candidates in wheat. 3) FOB spreads between US and EU/Black Sea wheat continue to suggest interest in US wheat will remain limited.

MORE COMMODITY-SPECIFIC COMMENTS

CORN December corn is clinging to small gains this morning as technicals remain weak, weather remains beneficial across the Midwest and each day that passes brings us closer to harvest. Export inspection data yesterday showed 49.0mbu inspected for export vs. the 40.0mbu needed weekly to hit the USDA export forecast. This is just one more reminder the demand component in corn remains strong. Much of yesterday was spent interpreting the USDA's Farm Aid package which will distribute $0.01/bu on 50% of a farmers 2018 production, redeemable after harvest is 100% completed. It is still not clear how farmers will prove their production without selling the commodity and providing scale tickets. In addition, in four days, all 17/18 old crop bushels become new crop bushels. How will the USDA ensure those bushels are not counted against new crop production? Lots of questions and few answers, unfortunately. Probably more important, the payout rate for sorghum is $0.86/bu, a commodity which has been much harder hit than corn due to the trade war. We are leery about pressing corn "down here," as we respected the $3.60 level well yesterday with demand firing on all cylinders in all sectors. Still, we are set to harvest 14.5bbu of corn in a month's time with all that corn needing a home. Corn conditions were unchanged yesterday at 68% G/E and compare with 62% G/E a year ago. More importantly, the percent of corn rated as mature was 10%, double the 5% average for this week.

SOYBEANS November soybeans are seeing light follow-through selling this morning after yesterday's lower close. Doesn't seem to be a good reason why prices won't retest contract lows at $8.2625 from July 16th. The announcement of the USDA's Farm Aid program today brought little reason for celebration. The $1.65/bu payment rate will be redeemable on 50% of a farmer's production once he can prove actual production. For farmers who aggressively forward contracted, the payment will be a windfall. For producers who did not, it should make them partially whole, but the larger question is whether it will affect their marketing decisions this fall or their planting decisions next spring? The question is especially salient if the other 50% of the payment gets paid out before year end, before next spring or not at all. The payments will help, but it will not change the fact the 18/19 carryout is likely to be over 800mbu vs. USDA's current 785mbu projection if yield ideas continue moving higher. Export inspections totaled 33.1mbu in the week ended 8/23, well better than the 17.6mbu needed weekly to hit the USDA forecast. Total inspections of 2.039bbu are down 2.9% from a year ago vs. the USDA calling for a 2.5% decrease y/y. It will come down to Census Bureau inspections and be very close to meeting the objective. Soybean conditions improved 1pt to 66% G/E vs. 61% G/E a year ago. 7% of the nation's soybean crop is dropping leaves vs. 4% average. North Dakota has 26% of its crop dropping leaves vs. 10% average while South Dakota has 16% dropping vs. 6% average. Harvest in the Northern Plains will be here before we know it, yet we still don't have a PNW soybean export program.

WHEAT Wheat prices are rebounding slightly this morning, trying to stave off a seventh consecutive lower close. A handful of wheat calendar spreads closed at new contract lows Monday, keeping pressure on flat price even as basis tries to find a bottom. Australian production ideas have stabilized, and Argentine production ideas are moving higher as are export projections. Any bushels which help bridge the gap between Northern Hemisphere export seasons is one more bushel global importers may not have to source from the United States. Spring wheat harvest is wrapping up in the Northern Plains with 77% of the crop harvested nationally. Grower selling has slowed to a crawl with the lower board and zero protein scales on the spot floor and in the country. With most farmers seeing average to above average protein in their wheat this year, they will be hesitant to part ways without any protein premiums. Wheat export inspections totaled 17.9mbu vs. the 20.4mbu needed weekly to hit the USDA forecast. Total inspections year-to-date measure 177.9mbu vs. the 274.1mbu a year ago, a deficit of 35.1% vs. USDA calling for a 13.7% increase y/y. We will be interested to see weekly deliverable stocks in Chicago this week after last week's data showed deliverable supplies of SRW down 18.40% y/y even though carryout and production were similar the last two years. Spring wheat harvest is in the homestretch with 77% harvested vs. 61% average.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.14 -$0.02 -$0.32 Sep -$0.002
Soybeans: $7.56 -$0.08 -$0.92 Nov -$0.013
SRW Wheat: $4.72 -$0.14 -$0.27 Sep $0.013
HRW Wheat: $4.83 -$0.17 -$0.19 Sep $0.000
HRS Wheat: $5.09 -$0.15 -$0.48 Sep $0.010

Tregg Cronin can be reached at tmcronin31@gmail.com

Tregg can be followed throughout the day on Twitter @5thWave_tcronin

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