DTN Early Word Grains

Mild Gains to Close a Soft Week

6:00 a.m. CME Globex:

December corn was up 1, November soybeans were up 3 1/2, and December K.C. wheat was up 5 1/2

CME Globex Recap:

Mostly better international equity markets to close the week although the US will be focused on Hurricane Florence this weekend and the aftermath it generates. Grains can bounce into the weekend but sentiment and money flow remain negative across the board.

OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average up 147.07 points at 26,145 and the S&P 500 up 15.26 points at 2,904.18 while the 10-year Treasury yield ended at 2.97%. Early Friday, DJIA futures were up 4.50. Asian markets are mixed with Japan's Nikkei 225 up 273.35 points (1.20%) and China's Shanghai Composite down 4.94 (-0.18%). European markets are mostly higher with London's FTSE 100
up 14.13 points (0.19%), Germany's DAX up 43.22 points (0.36%), and France's CAC 40 up 18.08 points (0.34%). The euro was up 0.00045 at 1.16980 and the U.S. dollar index was down 0.0430 at 94.4970. September 30-year T-Bonds were down 11/32nds while December gold was up $2.80 at $1211.00 and October crude oil was up $0.20 at $68.79. Soybeans on China's Dalian Exchange closed up 0.64% while meal was down 0.37%.

BULL BEAR
1) Due to lower wheat production, the European Union is expected to import 19.5MMT of corn, the highest in the bloc's history. 1) Spot floor trades in the wheat market were a fair amount lower today, giving bulls pause about extending underwater contracts.
2) US-HRW is trading sharp discounts to German/Baltic wheat and is even money with Russian wheat December forward. 2) On a continuous basis, the downside objective in corn is the 3.38 ¾ spike low from June 19th.
3) Soybeans have defended contract lows so far, begging the question if all the price negative news has been baked in? 3) Social media continues to buzz about the number of shuttle loaders going no-bid as there is almost no PNW export program in soybeans.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Small gains to close the week in corn, although December corn is down nearly 16c from Monday's open. Harvest will begin in earnest next week across a large share of the corn belt, so anecdotal yield reports should be rolling in hot and heavy. This year's corn crop has been ahead of schedule nearly the entire season, and based on moisture checks in the Northern Plains, 18/19 could see record harvest pace. Export sales were reported yesterday for the first week of the new marketing year. Weekly sales were 30.5mbu vs. the 35.1mbu needed weekly to hit the USDA's export forecast. Total commitments are 597.3mbu vs. 413.5mbu a year ago, a 44% gain vs. the USDA calling for a 1% decline in exports y/y. Cash markets continue to see the effects of old crop liquidation and early new crop harvest as CIF bids were down 1-3c yesterday and down 5-6c w/w. Calendar spreads also leaked lower with some making fresh contract lows yesterday. Most spreads with any volume are trading 65-67% of full financial carry. Corn open interest is up almost 28,000 contracts this week which are likely fresh speculative shorts being added at/near contract lows.

SOYBEANS November soybeans are slightly better to close the week as well and actually act the best of the three major contracts post report. For the week, November beans are down 8.25c but remain nearly 15c off the pre-report lows when talk of renewed trade discussions between the US and China began. Armed with the largest carryout in history, one would think embarking on another leg lower would be fairly easy for managed funds to accomplish. Soybean export sales got off to a bit of a slow start with weekly commitments up 25.5mbu vs. the 29.1mbu needed weekly to hit the USDA's forecast. Total commitments of 625.2mbu are essentially unchanged from a year at this time of 624.4mbu. The USDA is forecasting exports to be down 3.2% y/y. Cash basis paid to farmers across the Northern Plains continues to get worse as business is absent off the PNW. -160/-165X type bids are quite common in North and South Dakota, equating to cash bids in the high $6.00 area. Farmers will do their best to retain ownership of as many beans as possible with corn likely to be the crop sold off the combine if space needs to be made. All of the excess beans in the Northern Plains will also keep Gulf and crush bids honest and weak as the threat of trains moving south and east will be omnipresent all year long.

WHEAT Wheat markets are higher to finish the week along with corn and soybeans but it has been a disappointing week to be sure. Despite futures being down rather hard this week, basis continues to see no relief. KCBT spot floor trades were down 5-10c yesterday for 11.0-12.8% following Tuesday and Wednesday's lower trades as well. 12.0% protein HRW was bid +75/90Z vs. +91/106Z a week ago while 13.0% pro was +85/100Z vs. +93/108Z a week ago. Fortunately, FOB bids continue to move under European offers and tighten the gap with Black Sea wheat. However, Black Sea and Paris futures continue to take their cues from the US, trading lower nearly every day this week. Lots of tender business around, however, which should give us a clue whether US wheat is in the mix yet. Algeria bought 630,000MT of optional-origin wheat which appeared to be French but could change by execution. Saudi Arabia is tendering to buy 595,000MT of wheat for Nov/Dec shipment. Saudi Arabia will no longer accept Canadian wheat due to their diplomatic dispute. Tunisia is tendering for 50,000MT of durum and 67,000MT of soft wheat, Iraq is tendering for 50,000MT of US/CAN/AUS and Morocco is in for 50,000MT of US durum. Actual export sales released yesterday totaled 14.2mbu which were at the high end of expectations but still less than the 17.6mbu needed weekly to hit the USDA forecast. Total commitments of 357.8mbu are down 24% from a year ago vs. USDA calling for a 13% jump y/y. Total commitments for this date remain the lowest since 2009, and as a percentage of the marketing year forecast are the lowest since 1993. Cash is soft, spreads are weak and funds remain generally long the wheat market. Difficult recipe for higher futures.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.07 -$0.06 -$0.44 Dec -$0.044
Soybeans: $7.32 -$0.07 -$1.01 Nov -$0.006
SRW Wheat: $4.52 -$0.10 -$0.45 Dec -$0.004
HRW Wheat: $4.60 -$0.05 -$0.42 Dec -$0.001
HRS Wheat: $4.99 -$0.04 -$0.63 Dec -$0.005

Tregg Cronin can be reached at tmcronin31@gmail.com

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

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