Morning CME Globex Update:
The bulk of this week's volatility is expected to take place on Friday, triggered by USDA's annual Planted Acreage report and a quarterly Grain Stocks report. So until that influence has been digested by the market, grain and oilseed futures traders will hesitate to trade based on longer-term fundamental prospects. Quiet markets Thursday morning are consistent with such hesitation, and with the neutral signals from outside markets.
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Movement in corn futures prices is understandably quiet Thursday morning, as traders are reluctant to take aggressive new positions yet. A forecast for extreme heat and high nighttime temperatures this weekend is looking more certain in Missouri, Iowa, Illinois, and Indiana. Corn plants prefer cool night temperatures to adequately respire out of their leaves. So for some corn fields that have started silking, this forecast is likely to harm pollination and ultimate yield prospects right in the heart of the Corn Belt. However, before corn futures traders can worry about that, they must first experience whatever volatility comes on Friday when the USDA releases its Quarterly Grain Stocks report (with fresh information about old crop corn consumption) and annual Planted Acreage report (with information that may update estimates for new crop corn production). Meanwhile, in the cash corn market, the DTN National Corn Index, an average of local bids around the country, was $3.25 again Wednesday, showing the national average basis level at 36 cents under the September futures contract. This Friday will be first notice day for July grain futures contracts.
Soybean futures are lightly lower Thursday morning, but are still trading about 20 cents above the low from last week. Weekly export sales progress was optimistic in comparison to recent weeks, especially for soybean cake and meal headed to North American and South American destinations. The quarterly Hogs and Pigs report due out Thursday afternoon is expected to show the nation's swine herd still expanding at a rapid 3 percent year over year, which, along with expectations for growth in the poultry sector, may help demonstrate how domestic demand for soybean meal can somewhat mitigate the bearish effects of potential losses in soybean export business. The nationwide average old crop soybean basis bid collected by DTN Wednesday remained steady, but with first notice day for July grain and oilseed futures coming Friday, it's now expressed as 65 cents under the August futures contract, or $8.08 as the average closing cash price.
September KC wheat futures have dropped 20 percent off the late May high, but have attracted supportive buyers above $4.72 during recent trading sessions and remain stable Thursday morning. Spring wheat futures have fallen 16 percent during that same timeframe, with a lower trend still in place. Severe thunderstorms in the forecast for spring wheat country can mean either a) beneficial rain for the developing crop, or b) wheat-leveling hail. The spread between July and September KC wheat futures has extended to 20 cents wide (and there's another 23 cents of carry from September to December), which helps to explain why grain originators have been so eager to buy and store wheat, and therefore why they've been so aggressive with their bidding for the relatively scarce HRW crop. Basis bids for HRW remained astonishingly strong Wednesday, but when expressed against the September KC contract, on average they were 20 cents under the futures close. As a flat cash price, the average value of HRW ($4.59 Wednesday) has lost almost all its premium over SRW wheat ($4.58 Wednesday). The Spring Wheat Index was $5.16 Wednesday, or 25 cents under the September Minneapolis contract.
Elaine Kubcan be reached at email@example.com
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