DTN Closing Grain Comments

Grains Mixed Following Bearish Report

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

General Comments:

Corn was down 14 1/4 cents in the December contract and down 13 cents in the July. Soybeans were up 8 1/4 cents in the November contract and up 8 1/4 cents in the July. Wheat closed down 12 cents in the December Chicago contract, down 16 cents in the December Kansas City, and down 10 1/4 cents in the December Minneapolis contract.

The September U.S. dollar index is .46 lower at 94.765. December gold is $10.80/ounce higher at $1,213/ounce while December silver is .133 cents higher and December copper is .051 higher. The Dow Jones Industrial Average is up 62.66 points at 26,032.72. October crude oil is up $1.03/barrel at $70.28/barrel as Hurricane Florence nears the U.S. East Coast and inventories showed a decline for the fourth week and October natural gas is .002 higher.

Corn:

Wednesday's USDA WASDE report was viewed as bearish for both domestic and global corn markets. Average yield for the 2018 crop was estimated at 181.3 bushels/acre, higher than expectations when pre-report estimates pointed to an expected decline in the yield estimate from the August estimate. Corn production is estimated at 14.827 billion bushels, up 1.5% from 2017. Exports were increased by 50 mb to 2.4 billion, although still fall short of the 2017-18 volume shipped. Feed demand was revised 50 mb higher and ethanol demand was revised 25 mb higher, with total disappearance estimated at a record 15.105 bb, up 1.1% from 2017-18. Ending stocks are estimated at 1.774 bb, down 11.4% from 2017-18 but above expectations. Global ending stocks were increased by 1.5 mmt since last month to 157.03 mmt, when the average of pre-report estimates was calling for a modest cut in global stocks. Just the same, global ending stocks are estimated to fall by 37 mmt or 19.1% in 2018-19, while global trade is expected to increase by 10.6%, which bears watching.

December corn closed down 14 1/4 cents to $3.52 1/2/bu, while Wednesday's low fell just 1/2 cent short of testing the July low at $3.50 1/4/bu. A pattern of forecast rain over the Canadian prairies over the next seven days is expected to dip south of the Canadian border to lead to harvest delays in the northern plains, which bears watching.

Weekly Energy Information Administration data points to a week over week increase in ethanol stocks in the U.S. after two consecutive weekly declines to 22.894 million barrels, which is 8.5% higher than the same week in 2017. Plant production averaged 1.020 million bpd for the week ending September 7, below the four-week average and 2.6% lower than the same week in 2017. This report was viewed as bearish for corn prices overall DTN's National Average Corn Basis weakened one cent on Tuesday to 44 cents under the December, leaving the National Corn Index at $3.23/bu.

Soybeans:

Wednesday's USDA report was viewed as bearish for both domestic and global soybeans, with production prospects leading to higher than expected carryout both in the U.S. as well as globally. U.S. yield was estimated at 52.8 bpa, slightly higher than the average of pre-report estimates of 52.5 bpa, resulting in an estimated record production of 4.693 billion bushels. The soybean crush was estimated a modest 10 mb higher while the export potential was left unchanged this month at 2.06 bb, with ending stocks poised to grow by 114% to 845 mb year over year, slightly above expectations. Global production was estimated 2.22 mmt higher this month given an expected hike in U.S. production, while ending stocks were increased by a similar amount to 108.26 mmt, slightly above expectations.

Wednesday reports from China suggest that country's soybean import demand will drop to 83.65 mmt in 2018-19, down from 93.85 mmt estimated last month and the estimated 93.9 mmt imported in 2017-18. Wednesday's USDA report lowered China's import volume by 1 mmt to 94 mmt, well-above China's estimate. This bears watching as China takes steps to reduce their dependency on U.S. beans.

Prior to Wednesday's report release, soybeans rallied from session lows after the Wall Street Journal reported that the U.S. has opened the door to a new round of trade negotiations with China. November soybeans finished 8 1/4 cents higher on Wednesday at $8.40/bu, after reaching its lowest level seen since December 2008 on the continuous chart, with signs of noncommercial short covering. DTN's National Average Soybean Basis weakened 1 cent to $1.00 under the November contract on Tuesday, leaving the National Soybean Index at $7.32/bu.

Wheat:

Wednesday's USDA report could be viewed as mixed, with U.S. data left unchanged from August's estimates this month while estimated global production was increased by 3.37 mmt, largely due to a 3-mmt increase in Russia's potential crop. Global ending stocks were increased by 2.3 mmt to 261.3 mmt when a modest cut was expected in Dow Jones pre-report estimates as a result. While the USDA reported cuts in production potential for Canada and Australia, estimates remain optimistic when compared to official estimates from these two countries. As well, the E.U. production was left unchanged, despite a recent downgrade reported by France. Another number to watch is Russia's export capabilities, with the USDA leaving Russia's estimated exports unchanged at 35 mmt, when an active debate is ongoing over whether a volume of 30 mmt can be achieved.

DTN's Market Weather Factors were viewed as bullish for wheat on Wednesday, with wet conditions affecting Russia's spring wheat harvest while dry conditions continue to grip Australia. As crop estimates decline in Australia, little rain is expected in the next five days for the major growing areas.

Wednesday's Egyptian tender resulted in 12 offers, 11 of which originated from Russia with one offer from Ukraine. Four shipments were secured from Russia for shipment in October/November, averaging $223.08/mt FOB or $240.30/mt delivered.

December Chicago wheat closed down 12 cents at $5.06 3/4 on Wednesday, while December HRW ended 16 cents lower at $5.06 3/4/bu and MGEX spring wheat settled 10 1/4 cents lower at $5.65 /bu.

DTN's National Average HRW Basis remained steady at 42 cents under the December future on Tuesday, with the DTN National Hard Red Winter Index ending down 8 cents at $4.81/bu. Tuesday's National Average Soft Red Winter Basis strengthened 1 cent to 47 cents under the December, leaving the National Soft Red Winter Index at $4.72/bu. The National Average Spring Wheat Basis was unchanged at 63 cents under the December on Tuesday, with the DTN National Hard Red Spring Index ending 5 cents higher at $5.13/bu.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(CZ)

Cliff Jamieson