DTN Early Word Grains
Weaker Grains with Harvest Expanding, Bullish Catalyst Lacking
December corn was down 1 1/4, November soybeans were down 6 1/2, and December KC wheat was down 1.
CME Globex Recap:Mostly better global equities overnight, although worth noting, the Shanghai Composite hit the lowest level this week since November 2014. In addition, the onshore Chinese renminbi rate hit the lowest level in nearly two years. The trade war appears to be sinking its teeth into the PRC. Crude oil has slipped back below $70.00/barrel(bbls) Thursday. Grains are weaker as harvest expands anddemand indicators get a little shaky.
OUTSIDE MARKETS:Previous closes on Wednesday showed the Dow Jones Industrial Average down 91.74 points at 25,706.68 and the S&P 500 down 0.71 points at 2,809.21 while the 10-year Treasury yield ended at 3.209%. Early Thursday, DJIA futures were down 55.00. Asian markets were lower with Japan's Nikkei 225 down 182.96 points (-0.80%) and China's Shanghai Composite was down 75.20 points (-2.94%). European markets are higher with London's FTSE 100 up 6.26 points (0.09%), Germany's DAX up 25.11 points (0.21%), and France's CAC 40 up 4.66 points (0.09%). The euro was up 0.00105 at 1.15465 and the U.S. dollar index was down 0.1240 at 95.5300. September 30-year T-Bonds were down 18/32nds while December gold was unchanged at $1227.40 and November crude oil was down $0.52 at $69.23. Soybeans on China's Dalian Exchange closed up 0.16% and soymeal closed up 1.21%.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
| BULL | BEAR | ||
| 1) | Delayed soybean harvest has ideas of increased winter wheat acreage being tempered. Many states hit final plant dates between Oct. 15-31. | 1) | A Brazilian wheat mill announced they brought the first Russian wheat into the country since 2010 and would buy more if the price is right. |
| 2) | SX8/SX9 traded above 60 cents for the first time in over a month on Wednesday as short hedges are moved out of the front end. | 2) | Ethanol margins remain under pressure as weekly stock levels are now just below the all-time record set in March of 2018. |
| 3) | Estimates of Argentine wheat production continue to fall, all but guaranteeing combined Argentine/Australian ending stocks will fall to the lowest level since 1998-99. | 3) | Russian, German and Baltic FOB offers are back to trading a discount to U.S. HRW through February. |
CORN December corn is weaker Thursday, working on its third lower close in a row but keeping open bull-flag potential. Despite the potential three-day losing streak, corn futures are only down 5 3/4 cents off the highs versus the 16-cent rally last week. December corn is still holding the 100-day moving average, but more importantly, is still above the $3.70 range cap, which held price in check for two months. Wednesday saw weekly ethanol production released, which fell 29,000 bbls/day on the week to 1.011 million bbls/day. This was the lowest production in six months and was also a hair below last year's same-week production. Making matters worse, ethanol stocks rose sharply by 109,000 bbls to 24.130 million bbls which is just below March 2018's all-time record. The ethanol/corn spread, which is calculated by multiplying spot ethanol prices by 2.85 and subtracting the spot corn price, fell to $0.07/bushel (bu), the lowest since May 28, 2013. This spread helps illustrate the ability of ethanol prices to cover the input cost of corn, or not cover the cost of corn in this case. The spread speaks to the weak margin in ethanol production at the moment and could leave USDA's ethanol demand for corn projection at risk. CIF corn bids were mixed to weaker while corn spreads were mostly weaker.
SOYBEANS November soybeans are weaker with an overall softer trend since the highs put in Monday. As noted Wednesday, November soybeans are riding the 100-day moving average, which is declining itself, keeping directional arrows pointed lower. Weather continues to improve, pushing more combines back to the field and supplying end users with soybeans. Export sales are due out later Thursday morning and should show a decline from last week's surge. While multiple origins showing up on the same week to buy U.S. beans can provide for a solid week, they can't replace the consistent buying from China in years past. Dialogue between U.S. and Chinese representatives turned sour on Wednesday as both sides said the two countries may not be ready to meet at the next G20 summit. If China makes it through October and November without meaningful purchases of U.S. soybeans, then they are nearly there with how fast Brazil is planting soybeans. That said, cash traders are making note of the fact U.S.-Gulf soybeans are now cheaper than Brazilian soybeans on a landed basis, even with the 25% tariff implemented. This could prompt Chinese importers to reach for U.S. stem unless they are being directed not to. SX8/SX9 traded to 58 1/2 cents Wednesday, the highest trade since 9/14. Board crush margins remain sold at $1.32/bu or higher through March 2019.
WHEATWheat markets are lower Thursday, working on their third lower close in a row just like corn. December Chicago wheat is below the 50/100/200-day moving averages, but well inside the recent $5.05-$5.30 range. U.S. wheat prices are getting no support from Russia as FOB offers remain discounted to U.S. HRW and their export pace is running over 30% higher than a year ago. The market's hands are figuratively tied until Russia slows or stops exporting wheat. This comes on the heels of Brazil importing their first Russian wheat in over five years, and stating they would buy more if the price makes sense. This is the kind of demand U.S. HRW cannot afford to lose. Traders are also watching the pace of soybean harvest closely as several states with delayed bean harvest also have final winter wheat plant dates for insurance purposes approaching or already passed. Illinois is 36% planted with final plant dates between Oct.20-31. Indiana is 50% planted with a final plant date of Oct. 31, Ohio is 51% planted with final plant dates of Oct. 20-31 and Michigan is 40% planted with final plant dates of Oct. 10-25. One other tidbit worth noting is the MATIF wheat/corn spread trading to the highest level since March 2015, thanks in large part to collapsing Paris corn prices.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.32 | -$0.01 | -$0.42 | Dec | $0.001 |
| Soybeans: | $7.85 | $0.02 | -$1.01 | Nov | $0.006 |
| SRW Wheat: | $4.79 | -$0.05 | -$0.38 | Dec | $0.009 |
| HRW Wheat: | $4.84 | -$0.06 | -$0.37 | Dec | $0.006 |
| HRS Wheat: | $5.32 | -$0.08 | -$0.57 | Dec | $0.003 |
Tregg Cronin can be reached at tmcronin31@gmail.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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