DTN Early Word Grains

Grains Set to Finish Week on a Higher Note

Pre-5:00 a.m. CME Globex:

December corn was up 1/4, November soybeans were up 6 1/2, and December MPLS wheat was up 3 1/4.

CME Globex Recap:

Global equities are firmer, producing a relief rally after the S&P 500 had lost just shy of 5% the previous two sessions. This week has rattled investors with large nominal swings even if on a percentage basis the losses haven't been as bad as other selloffs. Safe-haven assets like treasuries and gold are not in demand to close the week. Grains enjoying an end of the week bounce on less bearish USDA reports than expected.

OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average down 545.91 points at 25,052.83 and the S&P 500 down 57.31 points at 2,728.37 while the 10-year Treasury yield ended at 3.169%. Early Friday, DJIA futures were up 202.00. Asian markets were higher with Japan's Nikkei 225 up 103.80 points (0.46%) and China's Shanghai Composite was up 23.45 points (0.91%). European markets are higher with London's FTSE 100 up 33.34 points (0.48%), Germany's DAX up 29.87 points (0.26%), and France's CAC 40 up 16.26 points (0.32%). The euro was down 0.00095 at 1.15865 and the U.S. dollar index was up 0.0730 at 95.1150. September 30-year T-Bonds were down 22/32nds while December gold was down $5.10 at $1222.50 and November crude oil was up $0.50 at $71.47. Soybeans on China's Dalian Exchange closed up 0.64% and soymeal closed down 1.67%.

BULL BEAR
1) USDA lowered the national average corn yield on yesterday's WASDE, opening the door for further cuts on subsequent reports. 1) 2018/19 soybean carryout rose by 40mbu this week to 885mbu, remaining below 900mbu only because USDA decided not to address demand this month.
2) Weekly ethanol production bounced back sharply this week, hitting 1.040 million bpd, up 2.4% from last week and 7.5% from last year. 2) USDA stood by their estimate of Russian wheat exports at 35MMT, even though most in the trade are closer to 30MMT.
3) Dalian soymeal futures rallied to the highest level this week since June 30, 2014 before selling off overnight. 3) Despite the rally yesterday, corn spreads were uninspiring with CZ/CH sitting inside the recent range at 63% of full financial carry.

MORE COMMODITY-SPECIFIC COMMENTS

CORN December corn is firmer this morning after the sharp rally Thursday saw the previous three days' worth of ranges leap-frogged as we also closed above the 50-day moving average. The surprise cut to the national average yield sparked the rally, even if total supplies were still up 89mbu thanks to the larger carry-in stocks. More than anything, the cut to the national corn yield after increases in August and September gave bulls hope yield will be cut in November and/or January. Since 1990, there have been three other years in which yield was raised from August to September but cut in October: 1990, 2006 and 2007. In all three of those years, yield was cut further in November and January. However, expecting a massive cut at this stage of the game probably isn't warranted considering how mature this crop is. 80% of the objective yield samples processed in the lab were rated mature, the highest percentage for the October WASDE since at least 2014. Adverse harvesting conditions across the western Corn Belt and Northern Plains could see some bushels lost, but thankfully, October 12th still affords plenty of harvest time left. December corn has the 100-day moving average sitting just overhead at 3.73 ¾.

SOYBEANS November soybeans are also better this morning, adding to yesterday's 6.0c gains as bulls took solace in the fact the report wasn't as bearish as feared. Like corn, November soybeans clawed their way back above the 50-day moving average with the 100-day about 25c above. Yesterday was a frustrating report for many as the national average yield went up, but demand was untouched even though a downgrade to exports was certainly warranted. In addition, many feel USDA leaving Chinese soybean imports unchanged from last month and last year at 94MMT was taking the easy way out. The department could be looking ahead to the potential meeting between President Trump and President Xi at the beginning of December, hoping resolution is still possible. However, if we see no demand from China during the months of October and November, the largest two export months of the year, it will leave the USDA little choice but to bring demand back down to reality. Near-term resistance at the 50% retracement of the 9.22-8.12 selloff at 8.67.

WHEAT November soybeans are also better this morning, adding to yesterday's 6.0c gains as bulls took solace in the fact the report wasn't as bearish as feared. Like corn, November soybeans clawed their way back above the 50-day moving average with the 100-day about 25c above. Yesterday was a frustrating report for many as the national average yield went up, but demand was untouched even though a downgrade to exports was certainly warranted. In addition, many feel USDA leaving Chinese soybean imports unchanged from last month and last year at 94MMT was taking the easy way out. The department could be looking ahead to the potential meeting between President Trump and President Xi at the beginning of December, hoping resolution is still possible. However, if we see no demand from China during the months of October and November, the largest two export months of the year, it will leave the USDA little choice but to bring demand back down to reality. Near-term resistance at the 50% retracement of the 9.22-8.12 selloff at 8.67.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.26 $0.06 -$0.43 Dec -$0.001
Soybeans: $7.56 $0.06 -$1.02 Nov -$0.003
SRW Wheat: $4.70 -$0.02 -$0.38 Dec $0.005
HRW Wheat: $4.76 -$0.03 -$0.38 Dec -$0.001
HRS Wheat: $5.32 -$0.02 -$0.58 Dec $0.001

Tregg Cronin can be reached at tmcronin31@gmail.com

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

(KA)