DTN Before The Bell Grains

Morning CME Globex Update:

A two-day surge in the U.S. dollar is putting pressure on commodity prices, and grains and oilseeds are no exception Friday morning. The bulk of Friday's futures trade will likely take place after the USDA quarterly Grain Stocks and Small Grains Annual Summary reports are released.

Other Markets:

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

Corn:

Corn futures were quiet Friday morning and have been quietly drifting higher all week in light trade, but traders will feel more opportunity to take confident bullish or bearish positions after the quarterly Grain Stocks report is released at 11 a.m. CT Friday. When polled by Dow Jones, traders said they're expecting to see Sept. 1 corn stocks (the end of the 2017-18 marketing year) at 2.0 billion bushels (bb), implying 3.3 bb of disappearance over the previous quarter. As always, it gets a little messy doing the accounting from one marketing year to the next when Texas, for instance, already had half its corn harvested by the end of August. The industry is prepared for storing large corn inventories in the upcoming marketing year, and the December-to-December futures spread has tightened this week, seen at 33 cents Friday morning. So it's the implications of strong demand, which may have the greatest influence on futures prices, considering the recent strong pace of exports and livestock feed usage. In recent years, this "report day" hasn't resulted in volatile one-day moves in corn prices, but it can sometimes change the overall fundamental outlook for prices and be an inflection point for an upcoming months-long trend. The DTN National Corn Index, an average of cash bids across the country, was $3.21 Thursday or 44 cents under the December futures contract.

Soybeans:

Outside markets aren't friendly to dollar-denominated soybean futures prices Friday morning, with the U.S. dollar index surging higher and soybean oil dipping lower in the wake of sharp Malaysian palm oil losses. Nevertheless, Friday promises to be a day of active futures trading volume in the soy complex. The quarterly Grain Stocks report may show historically-strong demand for soybeans as well as corn, if 2017-18 soybean ending stocks come in at the expected 394 million bushels (mb) implying 826 mb of quarterly disappearance. Given that soybeans are currently priced at bargain basement levels and a headline about strong usage would offset some concerns about the Chinese tariffs that have been in place since July, Friday's session could potentially see soybean futures turn higher. The average bid for soybeans is still a historically weak $1.03 under the November futures contract, putting the DTN National Soybean Index at $7.52 Thursday.

Wheat:

Minneapolis spring wheat futures are leading the light losses in the wheat complex Friday morning. That's understandable in advance of USDA's Annual Small Grains Summary, which is expected to show this year's spring wheat crop 47% larger than last year's, while drought-challenged winter wheat production shrank year over year (HRW expected to be 12% smaller than the 2016-17 production figure). Expectations frequently aren't met, however, and futures prices can be volatile in the event of any surprise. Friday is also the last trading day of the month, when some speculative traders close out large positions and choppy trade is sometimes noted. The weather forecast remains favorable for planting the 2019 crop of winter wheat in the U.S. Southern Plains and Midwest. DTN's collected SRW Index was $4.70 Thursday, (average basis stronger at 43 cents under the December Chicago futures contract); the HRW Index was $4.77 (steady at 40 cents under the December KC contract); and the Spring Wheat Index was $5.19 (stronger at 61 cents under the December Minneapolis contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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