Morning CME Globex Update:
Several soybean contracts established fresh lows during the overnight session, but the soybean market has also experienced some supportive buying interest as the morning wears on. Losses in the winter wheat futures contracts are outpacing the milder losses in Minneapolis spring wheat Monday morning.
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A global sell-off in stocks and commodities at the start of this week demonstrates the bearish mood of investors in a world where the two largest economic powers seem committed to a trade war, and corn prices were similarly headed lower at the start of Monday's trading session. Leading up to last week, speculative futures traders continued to pile on fresh short positions in the market, exacerbating the downward trend in prices, but there have been moments during recent trading sessions when a strong enough surge of buying activity suggests there are bargain hunters out there who see an opportunity when new crop corn is at 2-year lows despite still having to face much of the growing season's weather risk. Energy traders are likely to spend this week guessing and second-guessing about whether or not OPEC countries, along with Russia, will agree to increase crude oil production at an upcoming meeting. Crude oil has already dropped more than $2 per barrel off last week's high and may contribute a bearish influence on ethanol prices (and corn prices) through the week. Meanwhile, in the cash corn market, the DTN National Corn Index, an average of cash bids around the country, was $3.31 Friday, showing the national average basis level steady at 30 cents under the July futures contract.
Some moments of higher trade during the overnight session suggest there are bargain hunters taking positions in the soybean market, now that the continuous chart has dropped $1.48 off last month's high, with more than 60 cents of that movement happening last week. New crop soybean futures have experienced a similar drop, and given the broadly favorable weather that has been experienced by the growing crop recently, it's likely that the soybean market will see another bearish Crop Progress report Monday afternoon. Friday's NOPA Crush Report did show a record-large domestic crush for the month of May: 163.572 million bushels. However, it's the prospect of disrupted foreign demand for U.S. soybeans that will keep its foot on the throat of the soybean market for the foreseeable future. The DTN National Soybean Index was $8.43 Friday, with basis bids steady at an average of 63 cents under the July futures contract.
Rainfall over the weekend on the southern tier of the Canadian prairies, as well as North and South Dakota and Minnesota, will favor developing spring wheat and may add to the bearishness of that futures market, where contracts established fresh two-year lows overnight. Japan announced Friday it will suspend wheat purchases from Canada after discovering a patch of unlicensed glyphosate-tolerant GMO wheat in Alberta last summer. Japan accounts for almost 10 percent of Canada's wheat exports, and this could potentially be an opportunity for greater exports of U.S. milling wheat. Nevertheless, Minneapolis wheat futures started the week with a bearish tone. On Friday, the DTN Spring Wheat Index came to $5.56 or 15 cents under the July Minneapolis futures contract. For the hard wheat varieties, cash bids averaged 23 cents under the July Chicago contract for Soft Red Winter Wheat ($4.77), and Hard Red Winter wheat's average cash bids ended last week at only 10 cents under the July KC contract ($5.10). That is a jaw-droppingly strong basis level for this time of year, which is typically the gut-slot of Kansas HRW harvest, but in 2018 has been characterized by intense competition among cash grain originators seeking to fill bin space.
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