DTN Early Word Grains

Grains Limp into Weekend After WASDE

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

December corn was down 2 1/2 cents, November soybeans were down 4 1/4 cents, and December KC wheat was down 6 1/2 cents.

CME Globex Recap:

After a smart recovery from the end of October, U.S. equities look poised to close lower for the second session in a row. WTI crude is back below $60.00/barrel for the first time since February as additional production looks to come online in Iraq. Follow through selling in Grains after what was a mostly negative WASDE report.

OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average up 10.92 points at 26,191.22 and the S&P 500 down 7.06 points at 2,806.83 while the 10-year Treasury yield ended at 3.223%. Early Friday, DJIA futures are down 106.00. Asian markets were lower with Japan's Nikkei 225 down 236.67 points (-1.05%) and China's Shanghai Composite was down 36.76 points (-1.39%). European markets are also lower with London's FTSE 100 down 41.50 points (-0.58%), Germany's DAX down 54.54 points (-0.47%), and France's CAC 40 down 41.06 points (-0.80%). The euro was down $0.00225 at $1.13410 and the U.S. dollar index was up 0.2510 at 96.8850. September 30-year T-Bonds were up 14/32nds while December gold was down $5.30 at $1219.80 and December crude oil was down $0.77 at $59.90. Soybeans on China's Dalian Exchange closed unchanged and soymeal closed down 0.60%.

BULL BEAR
1) USDA cut national corn and soybean yield estimates with the former falling for the second month in a row. 1) As feared, USDA cut their projection of soybean exports by 160 million bushels this month which would be a four-year low if realized.
2) The low end of the average on-farm price for corn was raised by 20 cents to $3.20, putting the range for the 18/19 marketing year at $3.20-$4.00. 2) USDA adopted CNGOIC's revised corn production and stocks estimates for the last several years which ballooned both Chinese and global supply and demand.
3) Wheat export sales hit the needed level for the second week in a row, giving more confidence about reaching the USDA's export forecast. 3)

Sorghum exports featured net cancellations last week, helping keep pace for the slowest export program in history due to the trade war with China.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn futures are lowerFriday morning following an incredibly volatile session yesterday which featured a 13-cent range that engulfed the prior three sessions' worth of price action. Traders were not sure what to do with USDA's update to Chinese production and ending stocks which added 148.1 million metric tons of corn to global ending stocks vs. October. It felt like cooler heads prevailed by the closing bell with analysts and traders alike realizing if this data is true, all of these bushels in China existed prior to the WASDE and were still not available to the larger market. The larger stocks do not change the four-year low in US ending stocks, nor do they make any more supply available for global importers outside of the U.S. until South America comes online next spring. Weekly export sales remained disappointing at 27.6 million bushels vs. the 36.7mbu needed weekly to hit the USDA's forecast. Total commitments of 887.1mbu are up 16% from a year ago, but that spread has dropped from 32% two weeks ago to 16% this week. The cut to yield for the second month in a row already has analysts sharpening their knives for January and assuming further cuts will be made. The longer harvest drags out, the more validity that may have. December corn still has a $3.60-$3.80 range to cap trade until first notice day.

SOYBEANS Soybean prices are lower Friday morning, trying to close lower for the fifth straight session after Thursday's doji close. The fact the doji came after three straight lower closes is interesting, as is the fact the lows held the 100-day moving average. Export sales and WASDE were bearish for soybeans with the former continuing the weak string of performances while the latter showed larger than expected cuts to U.S. exports and Chinese imports. Weekly soybean export sales totaled 14.3mbu vs. the 30.2mbu needed weekly. Total commitments of 802.4mbu are down 31% from a year ago and are the lowest since 2011. Total commitments as a percentage of the revised USDA forecast at 42.23% is the lowest ratio since 2007. The cut to USDA's export forecast of 160mbu was probably more aggressive than many were expecting, but when 146mbu is cut from Chinese imports, there are only so many places to take it away from. The price action was actually somewhat encouraging considering the wet blanket thrown on the market. Traders will quickly shift their focus to South American planting and the potential meeting at the G-20 Summit at the end of the month. The only prayer we have of keeping 2018/2019 soybean carryout below 1.0bbu is a trade deal requiring set purchases of US soybeans. Short of that, this will be a long winter waiting on South American weather issues.

WHEAT Wheat markets are weaker, quietly working on their third lower close in a row but well inside Thursday's range. Like corn and soybeans, wheat sported a wide range yesterday as traders attempted to make sense of the huge revisions to Chinese corn and wheat supplies. Chinese wheat revisions were mild compared with corn, but 6MMT still made its way to global ending stocks for 2018/2019. However, in the long-run, these newly "discovered" supplies will change next to nothing with global trade flows and will not stop China from importing high quality blending stocks from the U.S., Canada and Australia. Weekly export sales were solid at 24.3mbu vs. the 17.0mbu needed weekly to hit the USDA forecast. These were also the second largest sales of the marketing year and the largest single week sales since early August. Total commitments of 505.8mbu are still down 16% from a year ago and the lowest in four years for this week of the marketing year. Elsewhere on the WASDE, USDA did cut Australian production by 1MMT to 17.5MMT but this is still 0.8MMT above ABARES last estimate and exports of 11.5MMT are still 2.0-3.0MMT larger than many private estimates. USDA did not adjust Canadian production or exports this month, preferring to have another month of harvest and quality data available.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.38 $0.02 -$0.36 Dec $0.004
Soybeans: $7.83 $0.02 -$0.96 Jan $0.023
SRW Wheat: $4.76 -$0.02 -$0.31 Dec $0.008
HRW Wheat: $4.65 -$0.05 -$0.32 Dec $0.002
HRS Wheat: $5.35 $0.00 -$0.45 Dec $0.008

Tregg Cronin can be reached at tmcronin31@gmail.com

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

(KR)