DTN Early Word Grains 07/19 06:03
Grains Higher, Trade Limps Off After Disappointing Week
December corn is up 1/2 cent per bushel, November soybeans are up 3 1/4
cents, and September K.C. wheat is up 2 3/4 cents.
By Tregg Cronin
DTN Contributing Analyst
6:00 a.m. CME Globex: December corn is up 1/2 cent per bushel, November
soybeans are up 3 1/4 cents, and September K.C. wheat is up 2 3/4 cents.
CME Globex Recap: Global equity markets are higher as we close in on the July
Federal Reserve meeting on July 30-31 with expectations at 100% for a 25 basis
point (bp) cut in benchmark rates. In fact, expectations have risen as high as
58% for a 50 bp cut from just a 6% chance earlier this week. A 50 bp cut would
seem extreme considering employment figures remain strong, and despite the
trade tiff with China, the U.S. economy still appears strong. In grains, most
contracts are higher to close what has been a negative week of trade. After
opening strong on threatening maps Sunday, forecasts have improved and markets
have extracted premium. There is still a lot of grass between the ball and the
hole, but it would appear the current ranges in our space will hold until the
calendar flips to August or the next WASDE report dials in supply-side data.
The weaker trade Thursday felt like the first time bulls had actually
entertained the idea seasonal highs could be in, although a couple days of
strength likely keeps bulls fed.
OUTSIDE MARKETS: Previous closes Thursday showed the Dow Jones Industrial
Average up 3.12 at 27,222.97 and the S&P 500 up 10.69 at 2,984.42 while the
10-Year Treasury yield ended at 2.038%. Early Friday, the September DJIA
futures are up 39 points. Asian markets are higher with Japan's Nikkei 225 up
420.75 (2%) and China's Shanghai Composite up 2302 points (0.79%). European
markets are higher with London's FTSE 100 up 3.82 points (0.05%), Germany's DAX
up 17.28 points (0.14%) and France's CAC 40 up 0.51 points (0.01%). The
September Euro is down 0.003 at 1.130 and the September U.S. dollar index is up
0.246 at 96.695. The September 30-Year T-Bond is down 3/32nds, while August
gold is up $10.90 at $1,439.00 and August crude oil is up $0.69 at $55.99.
Soybeans on China's Dalian Exchange were up 0.09% while soybean meal was -0.49%.
1) According to the latest GFS models, 1) Corn export sales totaled 7.9
most of the Corn Belt will be dry million bushels (mb), well below the
during the 6-10-and-8-14-day 13.6 mb needed and the sixth week in
outlook, counting on follow up seven that failed to hit the needed
2) The managed fund net short position 2) After trading to the highest level
in Minneapolis wheat now accounts in two months, front-month crude oil
for 23.3% of total open interest, a futures have slipped back down to
new all-time record. one-month lows with the June lows
3) Global ending stocks of corn are 3) New crop soybean export sales total
forecast to fall 9.08% in 2019/20, 103.0 mb which compares with 325.8
the largest percentage drop since mb a year ago while the USDA is
2010/11 and second largest since calling for a 10% increase
MORE COMMODITY-SPECIFIC COMMENTS
CORN Firmer corn prices as markets get set to close an ugly week with
December corn down 27 1/2 cents since the Sunday night open. Despite the rough
performance, December corn still did not enhance the range, remaining below the
$4.73 highs from June and still above the $4.20 1/2 lows from early July. We
still feel this range likely holds price action until we get to the August
WASDE and receive an updated look at acres and yield. The Western Corn Belt and
Plains will remain active the next 3 days before a dry spell takes hold and is
expected to last through the end of July. Fortunately, 8-14 day maps from NOAA
yesterday saw precipitation chances move from below normal to normal.
Temperatures maintain their cool bias through the beginning of August. Demand
indicators continue to be soft for corn with export sales coming in at 7.9 mb,
below the 13.6 mb needed weekly to hit the USDA mark. Total commitments stand
at 1.953 billion bushels (bb) which are down 16% from a year ago. USDA is
calling for exports to be down 13.8% from a year ago, but shipments remain the
real problem in our view. Cumulative exports as of July 11 totaled 1.760 bb vs.
1.884 bb a year ago, leaving 340 mb of corn to ship during the remaining seven
weeks of the marketing year. Without a meaningful change, the USDA could be
forced to tweak lower their marketing year forecast.
SOYBEANS Soybean prices are higher with the November contract once again
playing tag with the $9.00 mark. The chart pattern in soybeans is very similar
to corn with neither highs nor lows made during a week in which the most
actively traded contract lost 28 cents. Similar to corn, odds are low we trade
outside of our established ranges until we get into the more important
development weather for soybeans in August. While some areas of the Midwest
could be leaning dry by the time pod-set and pod-fill begins, temperatures do
not look threatening into the first week of August at least. Export sales
remain nothing to write home about, unfortunately, with weekly commitments
totaling 4.7 mb, pushing marketing year commitments to 1.787 bb. Total
commitments are already 87 mb above the USDA objective but the shipments
category remains troubling. Cumulative exports total 1.447 bb, leaving 253 mb
to ship between now and the end of August. The new crop book is also a concern
with commitments less than one third of the total on this same date a year ago.
USDA expects export demand to increase 175 mb in 2019/20, a tall task in our
opinion as estimates of Chinese import demand continue to fall. If Chinese
demand cannot rebound, it appears difficult in our opinion to expect the rest
of the world to make up the difference.
WHEAT Wheat contracts are higher across the three exchanges with Chicago
wheat trying to close higher for the first time in five sessions. For the
week-to-date, September Chicago wheat is down 26 1/2 cents and did make new
lows for the move, having spot prices at the lowest level since the end of May.
Despite a supportive July WASDE report, optimism has faded with bulls as the
Northern Hemisphere still has to harvest a majority of its bushels. In
addition, Russia remains the main focus in regards to the global wheat balance
sheet, and they did participate in this week's GASC tender, even if some of the
values did look a bit out of place. A tightening supply outlook for the major
exporters will push demand to the United States in the second half of the
marketing year, which is fine as long as the demand actually surfaces, and
importers aren't incentivized to hold off until new crop as they were in
2018/19. Large inverses in export offers gave huge incentive to minimize
purchases until the Black Sea and Europe had replenished supplies. Speaking of
exports, weekly export sales totaled 12.8 mb vs. the 13.7 mb needed weekly to
hit the USDA objective. This was the fifth week out of the last six in which
sales failed to meet the needed level. Total commitments of 288.7 mb are still
22% ahead of a year ago with the USDA calling for a 1.4% increase. The USDA
should be in no hurry to adjust their marketing year objective until more Q1 or
even Q2 is complete.
DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $4.17 -$0.11 -$0.08 Sep $0.000
Soybeans: $8.12 -$0.02 -$0.70 Aug -$0.004
SRW Wheat: $4.74 -$0.11 -$0.19 Sep $0.008
HRW Wheat: $4.11 -$0.09 -$0.22 Sep -$0.001
HRS Wheat: $4.79 -$0.02 -$0.46 Sep -$0.002
Tregg Cronin can be reached at email@example.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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