DTN Early Word Grains

Mostly Easier Markets to Cap a Lower Week

6:00 a.m. CME Globex:

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

CME Globex Recap:

Mostly quiet equity markets to close the week. Incredible volatility continues to grip the energy markets with natural gas following its 18% rally on Wednesday with a 13% drop on Thursday. The liquidation in crude oil has us wondering what that does to the opinion of managed funds toward grains? Quiet overnight trade in grains with most contracts looking at a lower close for the week. Holiday-mode trade begins next week.

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OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average up 208.77 points at 25,289.27 and the S&P 500 up 28.62 points at 2,730.20 while the 10-year Treasury yield ended at 3.105%. Early Friday, DJIA futures are down 69.00. Asian markets were mixed with Japan's Nikkei 225 down 123.28 points (-0.57%) and China's Shanghai Composite was up 10.94 points (0.41%). European markets are mostly higher with London's FTSE 100 down 8.99 points (-0.13%), Germany's DAX up 38.58 points (0.38%), and France's CAC 40 up 7.42 points (0.15%). The euro was up 0.00135 at 1.13660 and the U.S. dollar index was down 0.1400 at 96.9630. September 30-year T-Bonds were down 1/32nds while December gold was up $1.60 at $1216.60 and December crude oil was up $0.69 at $57.15. Soybeans on China's Dalian Exchange closed up 0.55% and soymeal closed up 1.42%.

BULL BEAR
1) Despite poor operating margins, weekly ethanol production was steady on the week and up 1.2% from the same week a year ago. 1) Saudi Arabia is tendering for 475,000 metric tons of hard milling wheat for January-March delivery, although the bulk of the business looks to go Baltic.
2) NOPA member crush for October was a new monthly and all-time record, continuing the strong domestic demand pull. 2) Ukraine's Ag Minister cited good weather to finish harvest while stating this year's grain crop could be an all-time record of 68 million metric tons.
3) KCBT spot floor premiums shot higher Thursday by 11-23 cents/bushel for 11.40-14.00% protein as export inquiries increase and domestic movement slows . 3) While crush demand remains strong, spot month board crush spreads dropped to 88 cents/bushel yesterday, the lowest since November 2017.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Unchanged to slightly lower corn prices overnight as corn was trying to string together the quietest three-day winning streak in history. December corn is still lower for the week, but trade has stabilized from Tuesday's losses. Analysts were anxious to get the latest ethanol production data to see if the poor operating margins had begun to drag on grind yet. That will have to wait at least another week as weekly ethanol production was 1.067 million barrels/day, down just 1,000 barrels on the week but up 1.2% from a year ago. Admittedly, this is slightly below the "needed" level to hit the USDA's ethanol production forecast. Ethanol production hasn't hit the "needed" level a single week this marketing year. Ethanol stocks did jump higher by 364,000 barrels to 23.514 million barrels which are up 9.4% from a year ago. As noted in Thursday's comments, RBOB/Ethanol spreads have dropped to 9-month lows with spot ethanol prices just off 13-year lows. Exports will be under scrutiny later this morning as sales have been slow the last couple of weeks. With two out of three demand legs showing cracks, $3.70+ December corn prices will be difficult to justify until that situation changes.

SOYBEANS Softer soybean prices overnight as prices have seen both sides in quiet trade. Price action this week has been supported by optimism surrounding U.S.-China trade relations. So far, there has been nothing concrete out of the discussions with constantly conflicting headlines and tweets. Adding support to price were comments from WAOB Chairman Seth Meyer at the Geneva Grain Conference which suggested the current U.S. soy export forecast of 1.900 billion bushels does not include any additional sales to China. This has not been the attitude of most analysts who suggested sales would be closer to 1.500bbu without additional sales to the PRC. USDA is forecasting global soybean imports at 152.270 million metric tons, of which China would comprise 59%. That leaves 62.27MMT, or 2.273bbu, to be covered by the U.S. and other countries. If the USDA's estimate is correct, the U.S. will satisfy 84% of all other global soy demand. Sounds plausible, but instead of million-ton sales to China, we had better get used to piecemealing boats one at a time. October NOPA crush was reported at 172.346 million bushels vs. estimates for 170.0mbu, 160.8mbu last month and 164.2mbu a year ago. Last month's crush was a new all-time record for any month. Encouragingly, despite the larger crush, soybean oil stocks of 1.503 billion pounds were under the average trade guess of 1.521 billion pounds and below last month's 1.531 billion pounds.

WHEAT Mixed wheat prices to close the week with December Kansas City trying to close higher for the first time in four sessions. December KC wheat missed making a new contract low yesterday by 1/4 cent, but definitely tried to touch where the September contract went off the board. Minneapolis has also trended weaker this week, albeit much less so than KC, while Chicago has been largely range-bound. Traders will be watching to see where U.S. HRW is offered in the Saudi tender with the optional-origin business still a possibility until shipments take place. Informa Economics released their latest estimate of winter wheat planted acreage, pegging the crop at 33.111 million acres which is up 576,000 acres from a year ago (+1.7%), but is down 807,000 acres from their estimate last month. As we've discussed, this is sharply below ideas for a 10-15% increase in September. Cash basis and spreads remain firm with movement slow as producers focus on harvest. Movement will slow even further next week with the Thanksgiving Holiday, so cash should continue to firm to keep product flowing. With the drop in the board, solid export sales should be expected again this week.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.34 $0.01 -$0.33 Dec $0.006
Soybeans: $7.92 $0.07 -$0.92 Jan $0.017
SRW Wheat: $4.72 -$0.04 -$0.31 Dec $0.006
HRW Wheat: $4.52 -$0.05 -$0.29 Dec $0.004
HRS Wheat: $5.34 -$0.01 -$0.42 Dec $0.015

Tregg Cronin can be reached at tmcronin31@gmail.com

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

(KR)

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