Morning CME Globex Update:
Grain traders' reactions to influential headlines -- about a global trade war affecting U.S. soybean, corn, and sorghum exports, and about poor wheat harvests in Europe and Ukraine -- may have already washed through the U.S. futures markets this week, leaving Friday's action to focus on profit-taking or repositioning with the favorable outside markets. The weekly export sales report showed 440,100 metric tons of wheat, 440,700 metric tons of corn, and 561,600 metric tons of soybeans sold.
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The near-term forecast for the U.S. Corn Belt shows gradually drier but overall beautiful corn-growing weather, and in the absence of any bullish production concerns, the futures market is likely to remain in its downward trend. American road trippers this week are paying an average of $2.92 per gallon of gas, and the economy is starting to get sensitive about these rising energy costs, so a pullback on the crude oil chart Friday is likely to encourage whole-market investors. Similarly, the June jobs report showed signs of economic optimism, with 213,000 jobs added during the month and growing labor force participation. Meanwhile, in corn country, the DTN National Corn Index, an average of cash bids around the country, was $3.19 Thursday, showing national average basis steady at 33 cents under the September futures contract. There were 259 issues and stops in the daily deliveries report for the expiring July corn futures contract.
Soybean futures have so far held a few cents above the fresh nine-year lows established Thursday, but there is virtually nothing preventing them from peeling the calendar even farther back than 2008, as all the export bearishness and yield bearishness which drove them here in the first place still remains. USDA's weekly export sales report showed 561,600 metric tons of old crop soybeans sold, but a lot of that business was switched from China to new destinations. The Malaysian palm oil market hasn't suffered losses as steep as the soybean market's recent dive, but it has also trended lower through 2018, suggesting that the world is expecting to find sufficient supplies of edible oils this year, even if they must be sourced via new and unusual trading patterns. New and unusual trading patterns generally mean higher transportation costs and less take-home money for crop producers, especially, in the case of the Trump trade war, for U.S. soybean farmers. In the cash soybean market, national average soybean basis bids averaged 60 cents under the August contract Thursday, bringing the DTN National Soybean Index to $7.79 per bushel. There were 437 issues and stops in the daily deliveries report for the expiring July soybean futures contract, and 921 issues and stops for the expiring July soybean oil contract.
U.S. wheat futures prices are mixed in mild trade Friday morning now that traders have finished chasing headlines about the European wheat harvest. After gapping higher Thursday, the Paris milling wheat futures chart appears to have encountered resistance at 187 Euros per metric ton (equivalent to $5.96 USD per bushel). It may be that the concerns about poor grain fill and quality losses during a rainy harvest in France are now fully priced in, and although dry weather continues to plague other competitors' wheat-growing regions, for instance in Ukraine, an end to the French rally gives global wheat futures an opportunity to pause Friday. The Paris market rallied 10 percent over the past 13 trading sessions, but U.S. milling wheat varieties only responded this week and would have to leapfrog another 25 cents higher if the market truly needed to match the European competition penny-for-penny. Here in the U.S., the average cash price for both SRW and HRW wheat Thursday was $4.80 per bushel, calculated as the product of either 26 cents under the Chicago September contract or 23 cents under the KC September contract. The HRS Index was $5.23, or 25 cents under the September Minneapolis contract. For the expiring July wheat contracts, there were 0 MGEX delivery intentions shown for Friday, 43 deliveries issued and stopped for KC July futures, and 1 contract of Chicago July wheat futures.
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