DTN Before The Bell Grain Comments

China Buys Beans In Front Of USDA Report

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

December corn is up 2 cents, November soybeans are up 3 cents, and December Chicago wheat is up 3 3/4 cents. At 8 a.m., USDA announced that 360,000 metric tons (13.2 mb) of U.S. soybeans were sold to China for 2015-16. Before the announcement, all three grains were higher along with most commodities, taking advantage of Friday morning's lower U.S. dollar. At 11 a.m. CDT, USDA will release its October WASDE report.

Other Markets:

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

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Corn:

December corn was higher early Friday, staying within its narrow range for the week as traders brace for the release of USDA's October WASDE report. This report is known for its more accurate production estimate and expectations are averaging around 13.5 billion bushels. As long as USDA's number is within 100 million bushels of that, corn prices should not see much short-term impact and as long as the estimate is below 13.6 billion bushels, the seasonal low should be behind us. Demand for corn from livestock feed and ethanol production is doing well, but exports are starting slow -- something that a lower U.S. dollar could help. December corn is holding below resistance at $4.00 heading into Friday's report. DTN's National Corn Index closed at $3.58 Thursday, slightly above the 200-day average and priced 34 cents below the December contract. In outside markets, the U.S. dollar index is down .48, continuing lower after Thursday's minutes from the Fed showed increased concerns about downside risks to the economy.

Soybeans:

At 8 a.m., USDA announced that 360,000 metric tons (13.2 mb) of U.S. soybeans were sold to China for 2015-16. Before the announcement, November soybeans were higher, but keeping a low profile this week in front Friday's WASDE report. Expectations are for USDA's crop estimate to come in below 3.9 billion bushels, but harvest reports around the country have suggested a higher yield than USDA's September estimate of 47.1 bushels an acre. The level of uncertainty for Friday's soybean crop estimate is high and there is likely to be a significant price move when we find out which side of 3.9 billion bushels USDA's estimate is going to fall on. While there is a chance soybean prices will have one more shot down this fall, the demand situation looks supportive beyond harvest. November soybeans remains in a downtrend, under bearish harvest pressure, but has held sideways for seven weeks, waiting for Friday's report. DTN's National Soybean Index closed at $8.25 Thursday, below the 200-day average and priced 57 cents below the November contract.

Wheat:

December Chicago wheat was higher early, helped by Friday morning's lower U.S. dollar. Theoretically, wheat exports could benefit from a lower dollar, but unfortunately, the competing economies of Europe, Ukraine, and Russia are not going to improve anytime soon so the only real hope for boosting export sales and wheat prices is to see a threat to global production. Dry weather concerns in Ukraine and Russia may be a start on next year's problems, but plenty could happen between now and then. Australia's crop is under stress and could drop a couple million metric tons in Friday's estimate from USDA, but world supplies remain plentiful. December Chicago wheat is likely to keep trading in a sideways range, lacking a significant bullish argument at this time. DTN's National SRW Wheat Index contract closed at $4.57 Thursday, below the 200-day average and 57 cents below the December contract.

Todd Hultman can be reached at todd.hultman@dtn.com

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Todd Hultman