Morning CME Globex Update:
A recent burst of higher movement in the U.S. Dollar Index certainly added downward momentum to the grain and oilseed markets, but futures selling activity accelerated through the early half of Friday morning, suggesting that traders' bearishness about China's soybean tariffs will be the main market influence through the session. Even the stock markets are panicky about the trade war.
|U.S. Dollar Index:||Lower|
A volatile drop in the Euro has caused a volatile spike in the U.S. Dollar Index (1.4 percent higher Thursday), which in turn has put bearish pressure on commodity futures prices Friday morning, including nearby corn futures which are 5 cents lower and establishing new all-time contract lows. Trading volume has been active through the morning, suggesting that speculative traders are seeing opportunities in this environment of trade bearishness and sustained downward momentum. Meanwhile, in the cash market, the DTN National Corn Index, an average of cash bids around the country, was $3.33 Thursday, showing the national average basis level stronger at 30 cents under the July futures contract.
No one has stepped in to stop the hemorrhaging in the soybean market, which has lost more than 60 cents this week and almost $1.40 per bushel since establishing last month's high. The wound that caused the bleeding, of course, came from the idea that China will respond to U.S. trade antagonism by placing 25 percent tariffs on U.S. soybeans. June 15 has arrived, and the "trade war" is now on. Although the tariffs would not completely shut off U.S. soybean exports to China, they would severely depress the quantity of shipments and the prices received for those shipments. Futures prices gradually fell lower and lower through the night and early morning trade, ultimately taking the new crop November contract as low as $9.27 1/4, a level not seen since last June. The DTN National Soybean Index was $8.64 Thursday, with basis bids slightly stronger at an average of 63 cents under the July futures contract.
Since last week, country basis bids for Hard Red Winter wheat have dramatically gone from 30 cents under the July KC futures contract to now only 11 cents under the July KC contract, on average. Harvested yields in Kansas have been disappointing, but that should not have caught cash buyers by surprise. Rather, the surprise has been farmers' ability and willingness to keep the grain on-farm, or at least not to give up ownership so close to $5 (the average cash bid for HRW was $5.12 Thursday). HRW originators will continue to be in aggressive competition with one another Friday while the grain futures markets keep dragging wheat's price tag lower. Soft Red Winter wheat bids, on average, remain below $5, at $4.78 Thursday or 24 cents under the July Chicago contract. A bullish fundamental argument could be made for spring wheat prices, with the Canadian prairies forecast to experience unwelcome dry heat next week. Minneapolis futures contracts are obliging with relatively smaller losses than the other wheat markets, but they are posting losses nevertheless. On Thursday, the DTN Spring Wheat Index came to $5.63 or 15 cents under the July Minneapolis futures contract.
Elaine Kubcan be reached at firstname.lastname@example.org
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