DTN Early Word Grains

Grains Ease Following WASDE-Day Surge

6:00 a.m. CME Globex:

December corn is down 1 3/4 cents per bushel, November soybeans are down 1 3/4 cents, and September K.C. wheat is down 2 cents.

CME Globex Recap:

Equity markets are mostly higher around the globe Friday morning, seemingly shaking off reports of the U.S.-China trade talks getting off to a rocky start. Tweets from President Trump on Thursday said "China is letting us down in that they have not been buying the agriculture products from our great Farmers that they said they would. Hopefully they will start soon!" There are also reports China intends to take a much more hardline approach in the next round of talks, and with the 2020 election cycle well under way, it would appear they may be content to wait and see if some replaces President Trump next year. Grain markets are weaker after a positive session Thursday following a mixed WASDE report. Wheat enjoyed the best performance, supported by a tightening balance sheet for major exporters. That said, most of the Northern American wheat harvest is still waiting to be combined and the potential demand for U.S. wheat isn't likely to occur until Q3-Q4. Corn and soybeans remain range-bound with supportive forecasts but needing confirmation from USDA and the August WASDE on acres and yield.


Previous closes on Thursday showed the Dow Jones Industrial Average up 227.88 at 27,088.08 and the S&P 500 up 6.84 at 2,993.07 while the 10-Year Treasury yield ended at 2.12%. Early Friday, the September DJIA futures are up 91 points. Asian markets are higher with Japan's Nikkei 225 up 42.37 (0.2%) and China's Shanghai Composite up 12.79 points (0.44%). European markets are higher with London's FTSE 100 up 17.72 points (0.24%), Germany's DAX up 3.3 points (0.03%) and France's CAC 40 up 32.36 points (0.58%). The September Euro is down 0.000 at 1.130 and the September U.S. dollar index is down 0.056 at 96.610. The September 30-Year T-Bond is down 12/32nds, while August gold is up $1.10 at $1,407.80 and August crude oil is up $0.15 at $60.35. Soybeans on China's Dalian Exchange were -0.03% while soybean meal was up 0.25%.

1) USDA reduced their estimate of Russian wheat production to 74.2 million metric tons (mmt) from 78.0 mmt on the June WASDE. 1) USDA cut 2018/19 corn demand by a combined 145 mb, pushing ending stocks to 2.340 billion bushels (bb) vs. 2.211 bb expected by the trade.
2) 2019/20 soybean carryout was reduced by a net 250 million bushels (mb) by USDA Thursday with carryout now projected at 795 mb vs. 1,045 mb last month. 2) Hard Red Spring wheat ending stocks for 2019/20 are projected at 323 mb, easily be the largest since 1987/88.
3) Extended maps from the Climate Prediction Center keep well above normal temperatures in place throughout the Midwest through July 25. 3) 2018/19 corn ending stocks were expected to come in at 2.211 billion bushels (bb) on the July WASDE, the second largest since the 1980's.


CORN Corn futures are trading slightly lower Friday morning, easing back from Thursday's rally despite a somewhat disappointing WASDE report. Had it not been for the performance in the wheat pits, corn prices may have struggled to close in positive territory. As suspected, USDA issued their updated corn balance sheet with the June acreage estimate of 91.7 million acres despite widespread condemnation from the trade. With a national average yield of 166 bushels per acre, unchanged from the June WASDE, production rose 195 mb with total supplies up 340 mb thanks to the bearish cuts to old crop demand. Some small new crop demand changes were made but the bottom line is we have a 2.050 bb new crop carryout to contend with until the August WASDE updates supplies. Yield is still going to be the most important component to this corn market, as it always is, but most analysts believe these demand numbers still have downside potential if bushels are removed from the supply side of the ledger. On the world front, we thought it noteworthy the USDA is projecting a combined Argentina/Brazil/Ukraine corn production number of 185 mmt vs. 187.8 mmt in 2018/19. We are a long way from any of those three countries having new crop supplies but assuming normal weather, the U.S. will have intense competition on the export front again next year. We still have eyes on the head-and-shoulders pattern in December corn, but we are also impressed with basis continuing to hold strong and spreads trending up.

SOYBEANS Soybean prices are also weaker a day post-WASDE as November soybeans look to end their winning streak at four sessions. USDA made a fair amount of changes to the soybean S&D, although like corn, few of them matter until we get a better handle on yield. USDA increased their 2018/19 residual demand by 41 mb to 72 mb while cuts to seed and crush partially offset to drop ending stocks by 20 mb to 1.050 bb. USDA adopted the June acreage numbers as we thought they would, but also reduced the national average yield by 1.0 bushel per acre to 48.5. Total production fell 305 mb with total supplies down 325 mb. We appreciated the cut to new crop soybean exports of 75 mb given the fact 2018/19 exports could still struggle to hit their 1.700 bb target and that major concerns still exist about Chinese demand in both marketing years. USDA made no changes to their Chinese import forecasts for 2018/19 or 2019/20, a risk in our mind given the Attaché updates earlier this week. There weren't any other major changes to the soybean picture in our mind, especially considering this market will still come down to acres and yield, neither of which we will have a better handle on until the August WASDE. There is still a sneaky head-and-shoulders pattern in November soybeans as well, although recovering back above the 100-day moving average yesterday was positive.

WHEAT All three wheat markets are lower Friday morning, taking a breather from the impressive rally on Thursday after USDA made larger than expected cuts to the major exporter balance sheet. The big cut was to Russia as we covered in the bull and bear section, as any sustainable wheat strength has to involve the world's largest importer. The big issue with Russia is their lack of carry-in stocks which were at a three-year low, followed by a dip in production from some of the early season estimates. Russian wheat exports are still projected at 34.5 mmt, which would be the third largest on record, but the recent GASC tender showed the apprehension by exporters to get too aggressive this early in the season. Were it just Russia alone, wheat may not have had the response it did, but European Union production was also reduced by 2.5 mmt, Canada was reduced 1.2 mmt, Australia was reduced 1.5 mmt and Ukraine was reduced 1 mmt. The fear is all of these origins could see additional cuts on future WASDE reports, pushing more perceived second-half demand to the United States. To be clear, even with 59 mb of additional feed demand over 2018/19, and 50 mb worth of additional exports over 2019/20, ending stocks are still projected at 1.00 bb. Supply inputs for the United States were mostly bearish with HRW production coming in slightly higher than estimates and "other" spring wheat production hitting 572 mb, matching the average trade estimate of 572 mb. The HRS supply situation is as burdensome as it has ever been since the 1980's which should see that class struggle relative to HRW and SRW.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $4.35 $0.10 -$0.10 Sep $0.007
Soybeans: $8.28 $0.06 -$0.71 Aug $0.013
SRW Wheat: $5.02 $0.17 -$0.19 Sep $0.005
HRW Wheat: $4.40 $0.20 -$0.22 Sep -$0.002
HRS Wheat: $4.95 $0.13 -$0.46 Sep $0.003

Tregg Cronin can be reached at tmcronin31@gmail.com

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