DTN Before The Bell Grains

Morning CME Globex Update:

The weekly Crop Progress report showed a fast row crop harvest pace, as expected, but without eager export markets to receive those crops and their end products, futures prices are stuck in a downward trend which establishes ever-lower contract lows day by day. The outside markets are mostly positive Tuesday, showing the intensified trade war was already priced in to the global outlook, and stock markets moved higher in China and Europe. U.S. stocks are also expected to open higher.

Other Markets:

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

Corn:

A fresh collection of record lows were noted in the row crop markets again overnight, with the December corn futures contract trading as low as $3.47 per bushel, and because this is the time of year when seasonal harvest pressure tends to push prices lower and lower through the next several weeks, we may expect this trend to continue. Nine percent of U.S. corn was harvested as of Sunday night's observations, compared to the five-year average of 6 percent harvested at this time of year. The escalated U.S.-China trade war is claiming new victims: Reuters reported on Monday that Green Plains Inc is shuttering two ethanol plants in Iowa because without the Chinese export market for ethanol, profitability just isn't there. Ethanol futures prices have sunk 10 percent over the past two months while RBOB and crude oil futures have maintained steady strength and are in fact trading higher Tuesday morning. The DTN National Corn Index was $3.05 Monday, showing the national average basis stronger at 43 cents under the December futures contract.

Soybeans:

Soybean harvest, like corn harvest, is running ahead of pace in 2018 after a summer of fast-accumulating heat units. Hurricane Florence brought flooding, standing water, and high winds as far as 250 miles inland in the Carolinas, but the impacts to their corn and soybean crops aren't expected to be disastrous except in low-lying areas. Damage to the region's livestock industry and its soybean meal demand is even less certain. Domestic demand has lately been a bright spot in the otherwise dismal soybean market, but even that took a hit Monday when the monthly NOPA crush report showed 158.89 million bushels of soybeans crushed in August (not as much as traders were expecting to see). The National Soybean Index hit $7.22 Monday, a fresh decade low that shows cash soybeans are, according to the average local bid, cheaper now than they've been at any time since the 2008 commodity bull run and the following economic collapse. The average basis bid was weaker again at $1.02 under futures. Physically, soybeans in the western Corn Belt still have nowhere to go, and merchandisers throughout the industry are anticipating large inventories of soybeans that will need to be stored for many months. The November-to-March 2019 soybean futures spread was as wide Tuesday morning as it's ever been: over 27 cents per bushel.

Wheat:

Wheat futures prices are shrugging off the unrelenting bearishness of the row crops and instead reflecting the persistent series of problems for global wheat production in 2018: most recently, weekend frost in Australia. Damage to their maturing wheat plants will be observable now and in coming days. Note that this frost damage occurred in Western Australia, which was previously expecting a record wheat crop, and not the droughty eastern regions where the crop was already lost. Wheat contracts are higher across the globe: Australian wheat up 1.5 Australian dollars per metric ton (equivalent to 3 U.S. cents per bushel), Chicago futures up a 7 cents per bushel Tuesday morning, and Paris milling wheat futures up 1.75 Euros per metric ton (7 cents per bushel). Meanwhile, rainy weather has somewhat slowed down the U.S. pace of winter wheat planting (only 13 percent planted as of Sunday night), but the acreage for the 2019 crop is nevertheless expected to expand, given the relative profitability of wheat versus soybeans. DTN's collected SRW Index was $4.60 Monday, (average basis 47 cents under the December Chicago futures contract); the HRW Index was $4.72 (steady at 41 cents under the December KC contract); and the Spring Wheat Index was $5.13 (steady at 63 cents under the December Minneapolis contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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