DTN Closing Grain Comments

Wheat Leads Markets Higher on Global Supply Concerns

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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(DTN illustration by Nick Scalise)

General Comments:

September corn closed 1/4 cent higher and the December contract closed 1/4 cent higher. Soybeans were up 2 3/4 cents in the September contract and up 2 3/4 cents in the November. Wheat closed up 18 1/2 cents in the December Chicago contract, up 21 1/2 cents in the December Kansas City, and up 14 1/2 cents in the December Minneapolis contract. The September U.S. dollar index is down .115 at 95.520. December gold is down $2.60 at $1,211.80/ounce while September silver is down .099 cents and September copper is down .034 cents. The Dow Jones Industrial Average is up 58 points at 26,122. October crude oil is up $.99 at $69.52/barrel and October natural gas is up .017.


The corn market reluctantly followed the move in wheat on Wednesday, with both the September and December contracts ending 1/4 cent higher. DTN's Market Weather Factors remain bearish for the row crops, with most areas seeing favorable conditions for crop development. Wednesday's low came within a nickel of the July low of $3.50 1/4, the lowest point reached in more than five weeks. Commercial selling weighed on prices, a sign of a growing bearish sentiment, with the Dec/March spread weakening to minus 13 cents. The Energy Information Administration's weekly report shows ethanol stocks falling for the first time in five weeks, noting a 5% drop in Gulf Coast stocks. Weekly plant production fell by 3,000 barrels/day over the past week, although remained 2.7% higher than the same week last year and was supportive for corn prices at levels above 1 million barrels/day.


Wednesday's soy complex posted a mixed close, with soybeans and soymeal attracting buyers while soybean oil finished in negative territory. November soybeans closed 2 3/4 cents higher at $8.36/bu after reaching a fresh low for the week with Wednesday's low falling within 5 3/4 cents of testing the contract's July low. Commercial buying in soymeal futures seemed a supportive feature this session, with further support from the weaker USD trade and spillover from the wheat market. As China seeks to replace U.S. soybean imports, there is an increased interest in importing bean oil. One media report suggests Argentina is exporting soybean oil to China for the first time in three years. This flow of product is despite reduced soybean production in Argentina this year requiring the country to import beans from Brazil, Paraguay and Brazil. The Brazilian currency, the real, moved higher this session but did reach a fresh low, taking the current contract to its weakest level in over 2.5 years at 1 Real=.2402 USD, a bearish factor for soybeans given that Brazil's product is less expensive in U.S. dollar terms. At the same time, social media reports suggest increases in Brazil's port prices for soybeans have brought export prices close to levels offered in the PNW, which bears watching.


A run in wheat prices was the story of the day on Wednesday, with all three wheat markets moving higher against their normal seasonal trend. December K.C. wheat rose 21 1/2 cents, December Chicago wheat rose 18 1/2 cents, and Minneapolis spring wheat rose 14 1/2 cents. Trade rumors have circulated that Russia may introduce an export tax on wheat or curb exports in some fashion when exports reach 25 million metric tons and that was a supportive feature this session. The latest USDA WASDE report forecasts Russia's exports at 35 mmt in 2018/19, down 7 mmt from the previous year. Paris milling wheat for December delivery rose five euros or 2.5% on Wednesday in a session led by bullish investors. The fear of an export ban, even though it may be unsubstantiated, has helped support global markets. The biggest move of the day, seen in K.C. wheat, resulted in a bullish outside-day reversal bar formed this session, although any gains in wheat could quickly disappear should the Russian government deny the rumors, as was the case a few short weeks ago. Limited rainfall over the Northern Plains should help advance harvest activity, while the Southwest is forecast to avoid significant accumulations in the next seven days and more rain would be beneficial in this area.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com


Cliff Jamieson