DTN Before The Bell Grains

Grain, Soybean Quote Board Flashing Green to Start Wednesday

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

After finishing 177 points higher Tuesday, Dow Jones futures are down 89 points early on Wednesday. August crude oil is up 24 cents per barrel, the U.S. dollar index is down .0390 and August gold is up $5.40 an ounce.

Other Markets:

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

Corn:

After looking like it was sure to break through key support and finally fill that open chart gap at $4.20, December corn has once again bounced. To start Wednesday, December is sitting right at the 50-day moving average. A new and drier weather pattern looks to extend now to the end of the first week of August. Some light, widespread showers could occur in parts of the needy Eastern Corn Belt next week, but overall the pattern looks dry into the major part of pollination. To start Wednesday, it is mostly warm and dry over the entire central U.S. Many in the trade feel the widely anticipated August USDA report and results of the re-survey of fields are likely to result in a much more bullish yield and production scenario for corn and soybeans. However, in corn, the large net long still held by managed funds and the ominous look of the corn chart, make a further break very possible ahead of the August report. Funds are thought to begin Wednesday still net long an estimated 128,000 contracts (640 million bushels) of corn. U.S. corn continues to be overpriced compared to primary competitors Argentina, Brazil and Ukraine. Domestically, corn faces challenges as well, with plenty of low-priced hard red winter (HRW) wheat, said to be offered at a sharp discount to corn. The U.S. sorghum crop is now rated 74% good to excellent -- the best since 1999, and also a sharp discount to corn. The competition for feed demand will be fierce. On a positive note, several media sources suggested on Tuesday that the Risk Management Agency (RMA) indemnity payments data support a prevented planting total of 15 million to 20 million acres -- far higher than most expect. December corn resistance will be found at $4.40 initially with everyone's support still down at $4.20. DTN's National Corn Index closed at $4.18 on Monday, with an average basis of 8 cents under September.

Soybeans:

November soybeans continue to move sideways, still caught in that range of $8.90 to $9.30. News that primary U.S. trade representatives will head to China next week for Monday through Friday meetings on trade is a positive, and apparently five Chinese crushers have been offered exemptions from the 25% soybean tariff on U.S. imports. However, it appears that even without the duty, Brazilian beans are still cheaper into fall. The much-rumored interest in September-October beans at the PNW from China has resulted in no new demand. Gulf soybeans were said to be up 12 cents per bushel for spot barges on Tuesday, perhaps indicative of new demand. However, China still has 193 mb of unshipped sales already on the books, with time winding down to get those bushels shipped. Most feel some of these sales are likely to get rolled into next year. With Eastern Corn Belt states such as Indiana, Illinois and Ohio the worst rated, dryness in those states, especially parts of Illinois, is becoming more of a concern. Many in the trade feel USDA's yield of 48.5 bushels per acre is too generous for soybeans. Funds appear to be clinging to a modest net short in soybeans still, estimated to be 60,000 contracts to begin Wednesday. November beans will continue to see support in the $8.90 to $9.00 area with major resistance up around $9.30 to $9.35. DTN's National Soybean Index closed at $8.17, reflecting an average basis of 69 cents under August. Wednesday morning USDA reported cancellations of export sales of 100,000 mt of soybeans for delivery to unknown destinations during the 2018/2019 marketing year.

Wheat:

All three wheat markets are getting a bounce to begin Wednesday morning as the winter wheat harvest winds down into the last 25% of the crop. The strength comes despite the Wheat Quality Council Spring Wheat Tour results from day one showing an average yield of 43.1 bushels per acre compared to last year's 38.9 bpa. The crop so far is described as above average as the tour heads through the Dakotas on Wednesday. Despite a U.S. export inspection pace which is well above a year ago, U.S. wheat is losing the export battle of late as cheaper priced EU and Black Sea wheat garners the lion's share of recent business. On Tuesday, Egypt bought 300,000 mt (11 mb) of wheat from Russia, the Ukraine and Romania. Tunisia has received offers on 92,000 mt (3.4 mb) of optional milling wheat and unlikely to be of U.S. origin. Consultancy APK-Inform raised Ukraine wheat exports to 17.8 million metric tons (mmt) from 16.2 mmt previously. There is more talk of the heat wave in Europe, with blazing temperatures in Germany and France, but more likely to affect that corn crop. Kansas City and Chicago September wheat have so far been able to hold above key support areas of $4.30 and $4.90, with KC having bounced from that area 10 to 11 times in the past month. However, in Kansas City, the 20-day moving average has crossed the 50-day to the downside -- often a trend-change indicator. DTN's National HRW Index closed at $4.09, and the average basis is at 23 cents under September.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow him on Twitter @Mantini_r

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Dana Mantini