DTN Before The Bell Grains

CME GLOBEX RECAP:

December corn is down 1/4, November soybeans are down 1 3/4. December KC wheat is up 1 1/4, Dec Chicago wheat is up 1/2, and December MIAX Minneapolis wheat is down .0125. 

OUTSIDE MARKETS:

The Dow Jones Industrials Index rose 196 points Tuesday, and Dow futures are down 4 points early Wednesday. October crude oil is up $0.62 per barrel. The U.S. Dollar Index is up .009 and October gold is up $.60 an ounce.

CORN:

Corn futures are moderately weaker but still trading in a sideways, narrow and choppy range as it has for the past 6 days. On Friday, traders will get their first objective data from the September crop report with actual field checks and real data samples, which should prove more reliable than previous survey-based estimates. The trade expectation is for the report to show a modest decline in yield to 186 bpa, but a still monstrous corn crop of near 16.5 billion bushels. Traders will be anxious to see how the much-reported incidence of rust and the dry finish to the crop in some areas may have pulled down corn potential from the USDA’s August forecast of 188.8 bpa and 16.7 bb of production. Some analysts and farm advisory firms are more optimistic, with one firm recently pegging yield at 189.1 bpa. Weather features a warming trend in the Corn Belt with 80s and 90s ahead as harvest is likely to accelerate. Today’s EIA report is likely to show a small ethanol production bump and a minor draw from stocks, but the average Midwest plant is estimated to be enjoying a 40 to 45-cent-per-gallon margin. The raging bull market in cattle took another hit on Tuesday, with feeder cattle futures falling to limit losses, and live cattle also down hard. On the export demand front, the U.S. has enjoyed solid demand, but there is plenty of competition now from Argentina, Brazil and even Ukraine. Brazil’s export group ANEC is projecting 7 mmt of corn exports from that country for September. Funds continue to carry a modest net short position estimated to be just over 90,000 contracts. With the monster crop ahead and the battle for storage, one can probably expect downward pressure on the corn basis at some point. In a bit of good news, Pakistan is rumored to have bought 300,000 mt of grain sorghum from the U.S. to counter corn losses from flooding. DTN national Corn Index closed at $3.78 and 42 cents below the December contract.

SOYBEANS:

Soybean futures are down more than a penny, and soy products are mixed in very slow trade. Traders are awaiting Friday’s USDA assessment of soybean yield after a mostly dry August and early September finish in some eastern and southern regions. The average trade estimate from Dow Jones is 53 bpa and just slightly below the August reading. The weekend frost event is being called low impact for North Dakota, Minnesota, and northern Iowa. Although traders are expecting a modest slide in supply, the big question is demand, where China has still not bought one bushel of U.S. new crop soybeans despite a hefty discount of U.S. to Brazilian beans. Some reports have the potential for the U.S. to lose as much as 14 mmt to 16 mmt (514 to 588 mb) of soybean export demand without a China trade deal soon. It is being reported that last year at this time, China had already bought 12 to 13 mmt of U.S. soy, according to Asian trade groups. We will likely see USDA ratchet down soy exports on Friday’s report, but it is likely to only stair-step it down. China is reported to have already bought 95% of October needs and 15% of November needs from South America. While there is still time for the U.S., the window is surely closing with big Brazil and Argentine soy crops on the horizon. Funds have liquidated much of their net soybean and bean oil positions coming into the report, but remain short an estimated 80,000 contracts of soymeal. DTN’s National Soybean Index closed at $9.53 with a soybean basis of 78 under the November futures.

WHEAT:

Wheat is a mixed and quiet affair early Wednesday, with all three U.S. futures markets and Paris milling wheat still hovering just above recent contract lows. Growing production ideas in Russia, Ukraine and Australia have weighed on prices, as have Russia’s declining offers. Russian FOB 12.5 protein wheat has slipped to near $228/mt according to IKAR and down close to $12/mt since mid-August, as major exporters seek to land limited end-user interest. Jordan, for the second straight week, passed on their 120,000 mt tender with Bangladesh still seeking 50,000 mt. Next week, the Syrian government is slated to tender for 200,000 mt of soft milling wheat. In other news, in what should be supportive to wheat, the U.S. Dollar Index has lost 10% this year. Stats Canada reported all-wheat stocks to be just 4.1 mmt compared to expectations for 4.42 mmt. The U.S. spring wheat harvest is fast approaching the finish line, while bearish is the good rain that has fallen in the southern Plains, with winter wheat planting currently at only 5% done. Funds come into Wednesday with a net short in Chicago estimated to be 84,000 contracts. DTN’s National HRW Index closed at $4.33 and 77 under the December futures board.

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