DTN Before The Bell Grains

Grains Lower Amid Dollar Pressure

Elaine Kub
By  Elaine Kub , Contributing Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Grain prices are lower Friday morning alongside a typical pattern of higher dollar / lower crude oil and other consumer commodities. The overall weekly movements have so far been neutral.

Other Markets:

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

Corn:

The December corn contract is down a few cents Friday morning, perhaps following up on Thursday's bearish supply-and-demand report, but it remains above $3.70 per bushel and on a week-over-week basis represents less than a penny of loss. The general interpretation for Chicago futures seems to be that although China's domestic corn stocks may be larger than previously realized, per the November WASDE report, the price for U.S. corn still needs to reflect steady demand for the crop at a time of year when prices generally drift upward from a harvest low. Valiant Nebraska farmers were harvesting corn even while the snow fell Thursday; this has been a long and challenging harvest across much of the Corn Belt. The DTN National Corn Index was $3.38 per bushel Thursday, showing national average basis steady at 36 cents under the December futures contract.

Soybeans:

Soybean oil futures are lower alongside losses in global edible oils, specifically Malaysian palm oil, where the January futures contract now trades at a three-year low equivalent to 22 U.S. cents per pound. Canola futures also hit a 2018 low on Thursday. USDA dropped its U.S. soybean yield projection from 53.1 bushels per acre to 52.1 bpa in the November WASDE report, but due to the inevitable reductions in export expectations, the overall domestic inventory showed a bearish scenario. The DTN National Soybean Index was $7.83 per bushel Thursday, showing national average basis stronger again at $0.96 under the January futures contract. It seems to get stronger and stronger each day now that the gut slot of harvest has passed, but it's still historically weak. At this time last year, national average basis was $0.80 under January futures, suggesting today's physical soybean market is still experiencing unusual bearishness due to the U.S.-China trade war.

Wheat:

The U.S. Dollar Index turned around Thursday and started heading back toward its 2018 high, and with continued strength Friday morning, it's pressuring dollar-denominated wheat futures prices 4 to 5 cents lower. USDA did trim its estimate of Australian wheat production, by 1 million metric tons, but that was no surprise to the market. One subtle change in the U.S. supply-and-demand report was an increase in the seed usage projection, reinforcing the expectation of larger winter wheat seedings for the 2019 crop, which has received favorable moisture in the Southern Plains ahead of winter dormancy. DTN's collected SRW Index on Wednesday was $4.76 per bushel (stronger at 31 cents under the December Chicago futures contract); the HRW Index was $4.65 (32 cents under the December KC futures contract); and the Spring Wheat Index was $5.35 per bushel (stronger at 45 cents under the December Minneapolis futures contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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Elaine Kub