DTN Before The Bell Grains

Global Wheat Concerns Still in Play

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

Morning CME Globex Update:

The grain and oilseed markets are being influenced by independent factors Wednesday morning. U.S. wheat prices are following a bullish bump in European and Australian wheat prices; corn prices are boosted by positive economic news and higher energy prices; and soybeans' morning gains are more vulnerable to bearishness while other oilseeds are posting losses.

Other Markets:

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

Corn:

Corn futures are a penny higher Wednesday morning alongside broad gains in the grain and oilseed futures markets. The maturing crop in the Midwest received rain this week, sure, but some locations experienced too much rain and even flooding, which of course isn't ultimately helpful for yield and overall production. Second quarter GDP grew by an impressive 4.2 percent, beating expectations in the Wednesday morning report, and consumer confidence is higher now than it's been at any time since October 2000, all of which will help stock traders maintain their bullish outlooks and presumably stave off any sudden pullback or volatility in the outside markets. For remaining old crop corn bushels, the DTN National Corn Index, an average of cash bids around the country, was $3.09 Tuesday, showing national average basis steady at 32 cents under the September futures contract.

Soybeans:

Although soybean futures are posting gains alongside corn and wheat, the new crop November contract is only 10 cents away from re-testing its July 16 low at $8.26 1/4. Malaysian palm oil prices are lower Wednesday, canola futures prices are lower Wednesday, and even the Brazilian real is lower Wednesday, touching another fresh 4-year low. All of these influences are of course bearish to soybeans. In the historically weak cash market, the DTN National Soybean Index showed nationwide average basis bids weaker again on Tuesday, now 93 cents under the November contract, or $7.40 expressed as a flat price. In the Mississippi Delta, flat prices for soybeans are $7.50 to $8.00 per bushel, and in the northwestern regions of the Corn Belt, there are cash bids as low as $6.63 per bushel.

Wheat:

Chicago, KC, and Minneapolis wheat futures contracts were higher by double digits in active trade Wednesday morning while arbitrageurs tried to keep pace with equivalent gains being made in Paris. European milling wheat futures are bouncing back upward above 200 Euros per metric ton Wednesday, suggesting that although the peak bullishness for global wheat prices may be behind us, there is nevertheless still risk to global wheat supplies. Droughty Eastern Australia will need more rain for their filling winter wheat crop to recover, and there isn't much rain in the forecast until possibly next week. Back in the U.S., DTN's collected SRW Index was $4.71 Tuesday, (average basis steady at 27 cents under the September Chicago futures contract); the HRW Index was $4.80 (still 19 cents under the September KC contract); and the Spring Wheat Index was $5.07, showing basis bids starting to strengthen (47 cents under the September Minneapolis contract) now that the gut slot of harvest has passed. Spring wheat harvest was officially measured at 77 percent complete as of Sunday night's Crop Progress observations.

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub