Grain, Soybeans Down Early in Two-Sided Overnight Trade

(Progressive Farmer) Morning CME Globex Update:

Dow Jones futures are up 52 points early Monday after reaching a new all-time high Friday. August crude oil is up 26 cents per barrel, the U.S. index is up .1480 and August gold is up $.80 an ounce.

Other Markets:

Corn:

Corn is lower Monday morning after gapping higher to start Sunday’s overnight session. Despite expectations for a 1% to 3% fall in corn condition ratings — and a mostly hot and dry forecast for much of the central Corn Belt — the sharp rally since last week’s USDA report is taking a pause. There are dry pockets developing in portions of Iowa, Missouri and Illinois, and the forecast calls for warm and dry conditions over the next 10 days. Tropical Storm Barry’s remnants appear to be moving mostly to the east and south and will drop from 3- to 6-inches of rain over Arkansas and Louisiana, after drenching the coastline over the weekend with flooding rains. Those rains are expected to move into parts of Indiana and Ohio, possibly dropping from 3/4 to 2 inches of rain. The corn market has rallied since the report despite the largest ending corn stocks since 1987, with potentially an even larger total in coming months as U.S. exports may be cut further. The 2.340 billion bushels (bb) of corn stocks could ultimately move to 2.4 bb, cushioning the blow of an expected downward revision in both yield and acres for the new crop in August. Funds remain net long corn, with an estimated position of long 174,000 contracts to begin the week. The corn basis continues to appreciate in the interior, and especially the Eastern Corn Belt, as end users reach to secure supply from stubborn farmers. The huge basis levels in the East have led to losses of as much as 60 cents per bushel in some ethanol plants. DTN’s National Corn Index closed at $4.45 on Friday, with a stronger average basis of 9 cents under September.

Soybeans:

Soybeans are lower to begin the week, as once again major resistance has repelled the rally. The $9.30-$9.50 area has once again proven an area difficult to get through. Soybeans are attempting the sixth straight higher close on Monday. Weather is hot and dry for the most part, and, as in corn, soybean conditions are expected to fall in Monday’s crop progress report. Even though U.S. soybeans are now cheaper than both Brazilian and Argentine beans landed in China, due to U.S. tariffs, Brazil continues to supply most of China’s soy demand. Large outstanding sales of 210 million bushels (mb) of U.S. soybeans to China are a real concern, especially if no final resolution to the trade war. The failure to ship over the next several weeks could lead to increased old-crop stocks, already at a burdensome level. There is a lot of talk about ultimate China soybean imports being well under current USDA projections due to the demand-killing spread of African swine fever, and China’s June imports of soybeans were only 6.5 mmt compared to 8.7 mmt last year. China’s agriculture ministry reported that China’s pig herd fell 25.8% and sow herd, 26.7% versus last year in June. Funds remain net short a modest 44,000 contracts of soybeans to begin the week. Look for $9.30-$9.40 to continue to be an area of strong resistance, with $9.15 being a minor support area on a setback. DTN’s National Soybean Index closed at $8.43, reflecting an average basis of 70 cents under August.

Wheat:

The wheat market has rallied since the USDA report as world wheat production was slashed nearly 10 million metric tons (mmt) on the heels of a strong heat wave affecting both the European Union wheat producers and those of the Black Sea. The wheat production of major U.S. competitors is still expected to be sharply above year ago levels. Here in the U.S., harvest is progressing rapidly and yields continue to suggest a final hard red winter (HRW) crop that is significantly above the 804 mb suggested by USDA. Although U.S. wheat export sales are trending higher than last year, on the recent rally U.S. wheat priced itself out of contention to many world importers. Russian FOB wheat to begin the week is being called a $25/mt discount to U.S. HRW Gulf offers, and even German hard wheat offers are said to be $16-$18/mt cheaper. Managed funds have whittled their position down to a net short of 5,000 contracts in Chicago wheat. Spring wheat conditions continue to be stellar, with widespread rains over the last week likely improving conditions even more from last week’s lofty 78% good-to-excellent reading. The recent USDA report revealed a spring wheat ending stocks number that is the largest in 32 years. DTN’s National HRW Index closed at $4.45, and the average basis is at 22 cents under September.