Morning CME Globex Update:
Recent beneficial rains across the heart of the Corn Belt have added to the favorable yield prospects of the 2018 corn and soybean crops, but yield prospects may not be driving market performance this week. Just as recent futures market losses were tied to trade anxieties, Wednesday morning's light gains are tied to the broad recovery in outside markets now that most of the damage to U.S. exports may be 'priced in.'
|U.S. Dollar Index:||Higher|
Tuesday's panicked sell-off has been replaced by a calmer tone throughout the global stock and commodity markets, and corn prices, too, have moderated and posted penny-sized gains at the start of Wednesday's session. There haven't been any new shoes to drop on the topic of U.S.-China trade (but how many feet does this creature have?). Volatility could yet creep in from the energy sector, including from ethanol futures. The oil futures market is so far steady on Wednesday morning, but traders are likely to be jumpy while OPEC members signal their production intentions ahead of a ministerial meeting this Friday. Meanwhile, in the cash corn market, the DTN National Corn Index, an average of cash bids around the country, was $3.24 Tuesday, showing the national average basis level stronger at 29 cents under the July futures contract.
The front-month soybean chart is trading roughly $1.60 below last month's high, but with roughly 3/4 of the U.S. soybean growing season still ahead of us, soybean traders may judge that a recovery of some risk premium would be appropriate. Futures trading volumes are dramatically lower during Wednesday morning's tepid recovery than they were during Tuesday's alarming meltdown. However, continued higher movement in the U.S. dollar suggests that investors are still in the process of liquidating "risky" positions and transitioning into cash while they wait to see how the global trade patterns and the global economy change during the upcoming summer. The DTN National Soybean Index was $8.27 Tuesday, with basis bids stronger at an average of 62 cents under the July futures contract.
There remain some concerns about dry weather for Australia's just-planted wheat crop and the Black Sea Region's maturing winter wheat crop, where harvest has now begun in both Ukraine and southern Russia, and wheat futures are 6 to 8 cents higher Wednesday morning. However, during this volatile week, the day-to-day direction of wheat prices seems to be coming from the row crop markets and their larger investor population. On Tuesday, average spring wheat basis bids stayed at 14 cents under the July Minneapolis contract and average SRW basis stayed at 22 cents under the July Chicago contract. The stiff competition for Hard Red Winter wheat supplies continues, however, strengthening the average cash bid to only 2 cents under the July KC contract as of Tuesday afternoon. That's an average, though, which includes typical bids of 15 to 50 cents under in western Kansas locations, but also the intensely competitive posted bids of 15 over the July contract in Salina and 25 over the July in Wellington. The U.S. HRW harvest is progressing ahead of pace and discovering generally high protein levels (above 12 percent) across the state of Kansas.
Elaine Kubcan be reached at firstname.lastname@example.org
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