Markets

GRAIN MARKETS: Spring wheat tops $8 after hot, dry forecast

Corn, soybeans add gains after USDA report.

Spring wheat closed sharply higher again and above $8 a bushel as forecasts put hot, dry weather in the northern Plains next week, where spring wheat and fall crops are being stressed by drought conditions.

Corn, soybeans and winter wheat had strong gains after USDA’s soybean and wheat acres on Friday were less than expected. The corn acreage and stocks numbers on Friday were on the bearish side of forecasts, but those futures moved higher with the other crops.

Trading was fairly active to indicate traders interrupted their four-day weekend to participate in the markets in Monday’s shortened session following the weather forecasts and USDA’s numbers. The markets will be closed for Tuesday’s Independence Day holiday and will reopen at 8:30 a.m. central time on Wednesday.

On Friday, USDA put all wheat acres at 45.7 million, which was at the bottom of trader forecasts in a Reuters survey. Soybean acres at 89.5 million were under the trade average but within the range, but the June 1 stocks of 963 million were on the low side of estimates. Corn acres came in at 90.9 million, down 3% from a year ago.

Weather forecasts are mixed for corn and soybeans with hot and wet conditions expected for the Midwest next week. The late-planted crops could use rain, while the hot weather may put early-planted corn, which will be pollinating soon, at risk. The 6- to 10-day and 8- to 14-day outlooks (July 8-12, July 10-16) are hot and dry for the western Midwest and northern Plains and cool and dry for the eastern Midwest.

Equities were higher, with the Dow Jones industrials up about 129 points when the crops closed helped by gains in the banking sector after some bullish manufacturing data. Crude oil was up about 70 cents a barrel, the dollar was higher and gold lower. 

Exports – USDA, Reuters:

-       Mexico bought 4.5 million bushels of U.S. corn. The deal includes 900,000 during the 2017/2018 crop year and 3.6 million in the 2018/2019 crop year.

-       Mexico bought 120,650 metric tons of U.S. soybean meal. The deal includes 92,540 in the 2017/2018 crop year and 28,110 in the 2018/2019 year.

-       Unknown destinations bought 5.14 million bushels of 2017/2018 U.S. wheat. The deal includes 2.57 million bushels of hard red winter wheat and 2.57 million of soft white.

-       Iraq seeks to buy 50,000 metric tons of hard wheat from the U.S., Canada or Australia. The tender closes July 3 with offers valid until July 9. Shipment details were not published.

-       Bangladesh is in the market for 50,000 metric tons of wheat. The tender closes July 11, with shipment 40 days after deals are signed.

-       Algeria seeks to buy about 50,000 metric tons of optional-origin milling wheat for September shipment. The deadline for bids is July 4. Algeria typically buys more than its tender amount.

-       Jordan seeks to buy 100,000 metric tons of optional-origin hard milling wheat. No shipment was reported. The tender closes July 13.

Corn’s surge on Monday closed it at a three week high, with the September settled above key moving averages and with a 56 RSI.

The recent gains prompted farmer selling of old-crop supplies on Friday and again early on Monday.

The pending hot weather could be a problem for corn nearing pollination. Grain merchants in Iowa and central Illinois said the crop could use rain. Recent showers missed large swaths of Iowa and central Illinois and southern Illinois.

The seven-day forecast favors light to moderate rain for most of the Midwest, while the 6- to 10-day is dry there.

Weekly export inspections of nearly 1.08 million bushels were about as expected and up from a week ago. Japan and Mexico were the top destinations. Mexico bought a mix of 2017 and 2018 corn.

USDA crop progress data will be delayed until Wednesday because of the holiday. Last week, corn was rated 67% good/excellent.

The CBOT estimated Monday’s volume at 432,796. Friday’s actual volume was 668,963. Open interest in Friday’s market was down 5,800 with July’s down 6,962 and December’s down 5,936.

July corn closed up 7-1/2 at $3.78, September up 7-1/2 at $3.88-1/2 and new-crop December up 7-1/4 at $3.99-1/4.

What to Look For: Talk of hot, dry weather is making the rounds at a time when corn will be pollinating soon. Dealers report a big disparity in corn maturity with early-planted fields tasseling or close to it, while late-planted or replanted fields are several weeks away from that stage.

Soybeans closed higher for the sixth straight session and at a six-week high with the August above most key moving averages and with an RIS of 66.6.

Despite the higher futures, grain dealers said farmers were slow sellers of old- or new-crop supplies, either on Friday or today.

USDA’s soybean acreage of a record 89.5 million was on the low end of trade estimates. Increases were seen throughout the Midwest and the Southeast plus in the traditional wheat states of Kansas, North and South Dakota, and Oklahoma.

The CBOT estimated Monday’s volume at 310,193. Friday’s actual volume was 377,215. Friday’s open interest in the higher market dropped 5,069 with July’s down 3,680 and November’s  down 2,808.

July soybeans closed up 22-1/2 at $9.64-3/4 and August up 23 at $9.70. New-crop November rose 26 to    $9.80-3/4.

What to Look For – Forecasts are turning hot and that may have funds anxious to exit short positions.

Spring wheat led the wheat markets higher, with spring wheat the highest since July 2013 and deep in overbought territory on technical charts.

The smaller-than-expected acreage in USDA’s report added to an already bullish mood created by the drought conditions in the northern Plains. Fewer wheat acres in Canada and concerns about hot, dry weather affecting European production have given spring wheat an added boost.

The CBOT estimated Monday’s SRW volume at 206,071. Friday’s actual volume was 290,284. Open interest in Friday’s higher SRW market increased by 6,258 with July’s down 1,782 and September’s up 4,454.

Chicago’s July SRW wheat closed up 25-3/4 at $5.36-3/4 and September up 29 at $5.55. Kansas City’s July hard red winter wheat rose 30 to $5.41.25 and September closed iup the 30-cent daily limit of $5.59-1/2. Spring wheat for July jumped 44-1/4 to $8.12 and September rose 47-1/4 to $8.19.

What to Look For – It will be about a month before harvesters enter spring wheat fields in the northern Plains, which until then will have the markets having to estimate the size of that drought-hit crop.

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