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DTN Early Word Grains         08/18 09:53

   Grains Lower as Supply Fears Reign

   December corn is down 6 cents per bushel, November soybeans are down 6 
cents, and September K.C. wheat is down 3 1/2 cents.

By Tregg Cronin
DTN Contributing Analyst

6:00 a.m. CME Globex:   December corn is down 6 cents per bushel, November 
soybeans are down 6 cents, and September K.C. wheat is down 3 1/2 cents.

CME Globex Recap:   Global equity markets are higher, attempting to add to last 
week's mostly positive trade. Trade will continue to be a focus this week as 
President Trump said he has a phone call scheduled with President Xi "very 
soon," while White House economic advisor Kudlow said Sunday that deputy-level 
talks are scheduled for this week and next. Fortunately, President Trump did 
postpone the implementation of his latest 10% tariff until December scheduled 
to go into place September 1. In the background, there is also nothing being 
done with regard to trade relations with either the European Union or Japan. 
Weaker Ag markets across the board as weather conditions remain mostly 
favorable and demand news remains almost universally pessimistic. One week on 
from the August WASDE and bulls are still trying to pick up the pieces. With 
the crop getting more mature, a more accurate assessment of yield can be had 
from private crop tours in coming weeks. With two-weeks left in August, it is 
worth keeping in mind that seasonally lows are often set during the months of 
September and October for both corn and soybeans.

OUTSIDE MARKETS:   Previous closes Friday showed the Dow Jones Industrial 
Average up 306.62 at 25,886.01 and the S&P 500 up 41.08 at 2,847.60 while the 
10-Year Treasury yield ended at 1.539%. Early Monday, the September DJIA 
futures are up 209 points. Asian markets are higher with Japan's Nikkei 225 up 
144.35 (0.71%) and China's Shanghai Composite up 59.27 points (2.1%). European 
markets are higher with London's FTSE 100 up 49.29 points (0.69%), Germany's 
DAX up 82.09 points (0.71%) and France's CAC 40 up 33.06 points (0.62%). The 
September Euro is steady at 1.110 and the September U.S. dollar index is up 
0.078 at 98.085. The September 30-Year T-Bond is down 2, while December gold is 
down $13.90 at $1,509.70 and September crude oil is up $0.27 at $55.14. 
Soybeans on China's Dalian Exchange were -0.24% while soybean meal was -0.14%.

   

   


   BULL                                   BEAR
1) Gro Intelligence pegged the U.S.    1) Large spec traders sold 42,088
   average corn yield at 163.2 bushels    contracts of corn last week, bringing
   per acre (bpa), 6.3 bpa under USDA     their four-week sell total to 123,892
   using satellite imagery and            contracts.
   rainfall data.
2) Northern Hemisphere major exporter  2) After early season drought abated,
   wheat ending stocks as a percentage    Canada is expected to produce 32.6
   of demand are projected at 14.93%      million metric tons (mmt) of wheat
   in 2019/20, the lowest level since     vs. 31.8 mmt last year according to
   2013/14.                               the USDA Attache'.
3) Managed funds sold 1,654 contracts  3) China's ministry of agriculture said
   of Minneapolis wheat last week,        the country's total pig crop in July
   pushing their net short position to    was 32.2% below year ago levels,
   a new record of 18,903 contracts.      accelerating from June's 25.8% drop.

MORE COMMODITY-SPECIFIC COMMENTS 

   CORN  Lower corn prices to begin another week of trading as bullish 
storylines remain few and far between following the bombshell USDA report 
released last week. December corn seemed to find support at the $3.70 level, 
bouncing both Thursday and Friday away from that area with sights set on the 
gap between $3.76 and $3.92 3/4. There are plenty of published crop estimates 
much smaller than the USDA but the larger supply narrative isn't likely to 
change until combines roll in October/November, if at all. To make matters 
worse, every piece of demand news as of late has been negative as well. Export 
sales remain dreadfully slow as Brazil is on pace to export a record amount of 
corn during the month of August. Ethanol margins have barely budged with the 
selloff in corn as ethanol has fallen just as sharply. Fat cattle prices remain 
at three-year lows while lean hog prices are in the lower third of the last 
three-year price range. Many are looking to cash markets and calendar spreads 
for signs the selloff is over, but producers would appear to be kicking bushels 
out the door in an effort to clear space for new crop. The CZ19/CH20 calendar 
spread sold off with flat price last week but has recovered slightly. There is 
nothing bearish about the first new crop spread trading at 43% of full 
financial carry under the new storage rates, but a modestly tighter forward 
curve will not be enough to stem the managed fund selling. Managed funds were 
still net long 17,213 contracts as of August 13, although this position has 
quite likely slipped negative since report day.

   SOYBEANS  Lower soybean prices with similar nominal losses as that of corn. 
Soybeans have not seen the level of bearish data lobbed at the corn market, but 
even with tighter supplies from a year ago, the soybean balance sheet cannot be 
called tight. Encouragingly, private exporters did report a sale of 296,500 
metric tons (mt) of soybeans to unknown destinations for the 2019/20 marketing 
year on Friday. These kind of sales are badly needed considering new crop 
commitments are over 60% lower than the same time a year ago. At current, USDA 
is expecting 2019/20 soybean exports to rise 75 million bushels (mb) from a 
year ago, a forecast which looks almost incredibly optimistic at this point. 
Adding to the negative export outlook, Reuters reported Friday Chinese traders 
said they can do without supplies from the United States in the fourth quarter, 
relying solely on South America. Not the response one would like to see as 
negotiations resume next month. Funds sold 3,817 contracts last week to leave 
them net short 79,988 contracts. No activity of note from commercial traders 
with funds maintaining short exposure in soy products as well. Two-week percent 
of normal precipitation maps still show some concern areas in the Eastern Corn 
Belt but still a marked improvement from a couple weeks back.

   WHEAT  Lower wheat prices, following corn and soybeans but nowhere near the 
aggression seen in row crops. Harvest is progressing in the Northern Plains 
when rain can be avoided but traders should strap in for a North American 
spring wheat harvest pushing well into September. Yield reports remain strong 
and quality so far has been favorable. Despite the delays, managed funds are 
showing no signs of slowing their record net short exposure in Minneapolis. 
Managed funds are now short 18,903 contracts, 46% larger than the previous 
record short in 2018. Commercials are not sitting idly by as the gross 
commercial long position jumped to 47,101 contracts, which is a top five 
position for this group. One would think commercials extending ownership speaks 
loudly about their view on value at current prices. Inter-market relationships 
remain in focus as KWZ/WZ has rallied off the lows by 15 cents per bushel. SRW 
should continue to carry a large premium over HRW this year given projected SRW 
ending stocks as a percentage of HRW stocks stands at 26.01%, the lowest since 
2001/02. Similar relationships exist between Minneapolis and Chicago. No 
shortage of wheat north of the border according to the USDA Ag Attach to 
Canada. Not only will production outstrip last year according to their 
projections, but export should remain right at record levels in the coming year.


              DTN Cash   Change From    National      Contract   Change from
Commodity     Index      Prev Day       Avg. Basis    Month      Prev Day
Corn:         $3.62      $0.11          -$0.09        Sep        $0.006
Soybeans:     $7.96      $0.09          -$0.84        Nov        $0.002
SRW Wheat:    $4.55      $0.02          -$0.16        Sep        $0.001
HRW Wheat:    $3.72      $0.05          -$0.22        Sep        $0.002
HRS Wheat:    $4.56      $0.03          -$0.50        Sep        -$0.004

   

   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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