DTN Early Word Grains
Mixed Markets Ahead of Harvest and Rain
December corn was up 1/2 cent, November soybeans were down 2 cents, and December K.C. wheat was down 3 cents.
CME Globex Recap:Equity markets are higher Thursday morning while the U.S. dollar index is trading at the lowest levels since July. Crude oil is once again over $70.00/barrel, adding support to the commodity complex. Grains mostly taking a breather Thursday, although harvest looks to be delayed most of this week with rain around the entire Corn Belt.
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Previous closes on Wednesday showed the Dow Jones Industrial Average up 158.80 points at 26,405.76 and the S&P 500 up 3.64 points at 2,907.95 while the 10-year Treasury yield ended at 3.072%. Early Thursday, DJIA futures were up 1.75. Asian markets are higher with Japan's Nikkei 225 up 251.98 points (1.08%) and China's Shanghai Composite up 30.90 (1.14%). European markets are lower with London's FTSE 100 up 12.77 points (0.18%), Germany's DAX up 37.91 points (0.31%), and France's CAC 40 up 30.08 points (0.57%). The euro was up 0.00260 at 1.17230 and the U.S. dollar index was down 0.2170 at 94.3280. September 30-year T-Bonds were up 9/32nds while December gold was up $1.01 at $1203.21 and October crude oil was up $0.30 at $71.42. Soybeans on China's Dalian Exchange closed down 0.38% while meal was up 0.81%.
| BULL | BEAR | ||
| 1) | Even with talk of ethanol plants being idled, weekly ethanol production remains above the level needed to hit the USDA forecast | 1) | CIF Gulf premiums continue to trade at unders to the board, the weakest level since the 2006-07 marketing year. |
| 2) | Wheat production and export ideas out of Australia continue to fall, bolstering ideas of demand returning to the U.S. | 2) | New contract lows were set or tied in most corn and soybean spreads Wednesday. |
| 3) | Soybeans bounced off Fibonacci progression support while momentum indicators are diverging from price, arguing for a larger upward correction. | 3) | It looks as though U.S. wheat might have been just out of business in the Saudi Arabia tender. |
CORN December corn is trading right around unchanged, not having done enough in either direction to confirm the downtrend is over or take out the June 19 stab low at $3.38 3/4. Like soybeans and wheat, December corn is showing a bullish divergence in momentum with price making a new low but momentum failing to make a fresh low. This is a sign prices are slowing, an important factor in any reversal attempt. Unlike soybeans and wheat, corn demand remains strong with weekly ethanol production totaling 1.051 million barrels per day (bpd), up 31,000 bpd on the week and about 1.7% above the same week a year ago. Unfortunately, the margin compression being discussed is real with ethanol prices sitting at the lowest levels since 2005 and exports falling due to the trade disputes with various countries. It is a sad state of affairs when ethanol plants are seeing red ink as corn prices are essentially sitting at multi-year lows. Crude oil trading at four-year highs is not translating into ethanol or corn price strength, even if it is making things such as fertilizer more expensive. Trends remain lower.
SOYBEANS November soybeans are slightly lower and we can't call Wednesday's firmer trade a reversal in the strictest technical sense. However, it is not unusual for soybeans to make seasonal lows in the month of September, and dare I say, it is difficult for soybeans to get more bearish than trade chatter has been recently. Between more tariffs being enacted, big yield talk and NOPA crush data for August coming in below the average estimate, there just aren't any soybean bulls left. Ag media outlets were carrying an article this week talking about Chinese hog operations cutting soy meal in their feed rations to 12% from 20% currently, which would allow them to nearly cut out the U.S. in their import grids. While that idea might be a bit exaggerated, a closer look of the Chinese balance sheet does show they could lower imports another 4 million to 5 million metric tons (mmt) without much difficulty and without cutting ending stocks to untenable levels. More important to this analyst is the long-term damage to U.S.-Chinese trade relations, and if we aren't seeing a fundamental change happen where soybean demand globally is destroyed. Even if a trade deal gets done, what's to say the demand comes flooding back? That remains the real risk in the soybean market.
WHEAT Wheat prices are better Thursday although haven't yet taken out the previous corrective high on any contract. Firmer prices this week have been owed to continued production concerns out of Australia as well as export-restriction chatter from Russia once again. While the Russian issue is still a moving target, Australia is losing bushels and exports and ASX futures would seem to confirm that idea. The most actively traded January ASX contract hit A$450/metric tons Wednesday, a new record high, according to our data set as drought and frost deal farmers a heavy a blow. Production is now being called 17 mmt to 18 mmt with a bias to the downside versus USDA at 20.0 mmt, while exports ideas are dropping to 10 mmt versus USDA at 14 mmt. Four million metric tons of export demand would need to be made up somewhere with the U.S. being the most likely candidate. The U.S. doesn't need any more potential demand to be penciled in, rather it needs some actual sales on the books, which are sorely lacking. The central and Northern Plains are receiving rains Thursday with rains expected across Kansas Thursday and this weekend. Winter wheat planting is progressing on schedule and should be finding good soil moisture for early germination. Despite the past couple days strength, trends remain down from all time scales.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.01 | $0.02 | -$0.44 | Dec | -$0.007 |
| Soybeans: | $7.27 | $0.15 | -$1.03 | Nov | -$0.007 |
| SRW Wheat: | $4.76 | $0.12 | -$0.47 | Dec | -$0.001 |
| HRW Wheat: | $4.85 | $0.10 | -$0.41 | Dec | -$0.004 |
| HRS Wheat: | $5.26 | $0.08 | -$0.62 | Dec | $0.005 |
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