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GRAIN MARKETS: Bearish USDA numbers interrupt weather market

USDA raises corn and wheat estimates.

Corn, soybeans and wheat closed lower after the U.S. Department of Agriculture raised its forecasts for those harvests this year, plus it reduced some demand numbers for old-crop corn.

Those changes, plus new weather forecasts that moderate the dry conditions in the Dakotas, had traders heading for the exits.

The focus turns to weather now that the USDA numbers are out. The latest 6- to 10-day outlook (July 17-21) shows chances for rain in the Dakotas. Hot conditions should remain in place for the northern half of the country. Storms spring up Wednesday and Thursday in the Midwest.

The July crop contracts expire at noon on Friday.

Equities were higher when the crops closed, with the Dow Jones industrials up about 140 points, following positive comments about the U.S. economy by Federal Reserve Bank chairman Janet Yellen. Crude oil was up about 45 cents after a weekly report showed a larger-than-expected drop in supplies. The dollar and gold were both higher.

Export highlights (from USDA and Reuters):

- Wire reports say Egypt will stop subsidizing flour for its bread program beginning next month -- a move that could lower wheat imports as much as 10%.

- Pakistani importers bought about 65,000 metric tons of soybeans to be sourced from the U.S. or Brazil, European traders said. Shipment is for February 2018.

- Japan seeks to buy 93,765 metric tons of wheat from the U.S. and Australia in its weekly tender, with results due on Thursday. From the U.S., it seeks 10,080 of western white, 17,775 of hard red winter and 35,045 of dark northern spring wheat. Loading is between Aug. 21 and Sept. 20.

- 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.

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

Corn closed lower, with the 2017 contracts back under $4/bu. but remaining higher for the week and well above moving averages.

The larger ending stocks for this year and next year were bearish. December corn settled in the middle of this week’s higher range and just under overbought levels on charts with an RSI of 64.

Corn will be pollinating soon, and forecasts favor hot weather then for the Midwest.

The Chicago Board of Trade (CBOT) estimated Wednesday’s volume at 570,543. Tuesday’s actual volume was 515,357. Open interest in Tuesday’s flat market increased by 23,905, with July’s down 331, September’s up 4,710 and December’s up 11,547.

July corn closed down 16 cents at $3.7625, September dropped 16.25 cents to $3.855, and new-crop December slid 15.5 cents to $3.9875.

What to look for: Weather remains hot and dry for pollination the next few weeks. Weekly export sales on Thursday are expected to up from last week’s low numbers.

Soybeans closed lower in active trading but trimmed losses going into the close as attention will shift to weather, which is expected to be hot for the Midwest next week.

The August and November contracts stayed within recent price ranges, well above key moving averages and deep in overbought territory on technical charts.

USDA left Argentina and Brazil soybean crops unchanged at 57.8 million and 114 million metric tons, respectively. It raised world production and ending stocks, with slight increases in production in the U.S. and China. World ending stocks increased more due to an increase in previous-year ending stocks that will be this year’s beginning stocks.

CBOT estimated Wednesday’s volume at 330,096. Tuesday’s actual volume was 295,468. Tuesday’s open interest in the higher market increased by 6,665, with July’s down 242, August’s up 430 and November’s up 973.

July soybeans closed down 8.5 cents at $10.1675, August was down 8.5 cents at $10.2075 and new-crop November dropped 9.25 cents to $10.34.

What to look for: Export sales on Thursday may be similar to the previous week, although new-crop business may be improved from the previous small number.

Wheat markets finished lower after USDA raised its winter wheat production estimate and expects the second-highest average yield on record: 49.7 bu. per acre.

Spring wheat is expected to be 21% lower at 423 million bu. due to lower average yield and fewer acres. The 423 million was down from the average forecast but within the wide range of estimates.

September spring wheat futures remain well above moving averages and in overbought territory on technical charts.

CBOT estimated Wednesday’s soft red winter wheat volume at 166,700. Tuesday’s actual volume was 160,717. Open interest in Tuesday’s higher soft red winter wheat market increased by 5,588, with July’s down13 and September’s down 232. Kansas City, Mo., hard red winter wheat volume on Tuesday eased to 44,978 from Monday, while open interest increased by 3,227 in Tuesday’s flat market.

Chicago, Ill., July soft red winter wheat closed down 13 cents at $5.225, and September was down 16 cents at $5.37. Kansas City July hard red winter wheat dropped 13 cents to $5.28, and September dropped 13.5 cents to $5.44. Spring wheat for July dropped 14.75 cents to $7.82, and September dropped 14 cents to $7.8275.

What to look for: Weekly export sales on Thursday are expected to be similar to the previous week’s 13.8 million bu.

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