Morning CME Globex Update:
Outside markets aren't adding fresh pressure to the grain and oilseed markets Friday morning, with investors in stocks and consumer commodities mostly pursuing higher prices. Nevertheless, the new crop corn and soybean markets have enough of their own supply bearishness to keep the charts in a sustained bearish trend.
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A cooler forecast for next week's weather will only help the pollinating U.S. corn crop, and corn prices have started the session with light losses. Contrary to traders' bearish expectations Thursday, USDA's economists didn't raise their estimated 2018 U.S. corn yield, and instead left it at 174 bushels per acre. The futures market reacted positively to that conservatism, but not with any overwhelming bullish momentum that changed the overall downward trend of the charts. After all, there is a lot of summer left, and widely beautiful crop conditions that may yet support a record-high corn yield. In the old crop market, the DTN National Corn Index, an average of cash bids around the country, was $3.14 Thursday, showing national average basis steady at 31 cents under the September futures contract. This is the last trading day for July grain futures contracts, and there were 177 issues and stops in the daily deliveries report for the expiring July corn futures contract.
During the early part of Friday's trading session, soybean futures have resumed their downward direction and are within a hair's breadth of establishing fresh contract lows. The big takeaway from Thursday's WASDE report was the 250-million-bushel reduction in U.S. soybean export projections, ostensibly because the report "considers those trade actions which are in place," i.e. China's 25 percent retaliatory tariffs on U.S. soybeans. Whether or not that number surprised traders, as the soybean futures market looks ahead, traders will continue to consider not only outright losses of export business, but also the costs associated with establishing new soybean destinations and new transportation logistics. U.S. soybeans must continue to trade at a significant discount to Brazilian beans. That's very clear in the U.S. cash market. Nationwide soybean basis bids averaged 60 cents under the August contract Thursday, bringing the DTN National Soybean Index to $7.73 per bushel. There were 135 issues and stops in the daily deliveries report for the expiring July soybean futures contract and 577 issues and stops for the expiring July soybean oil contract.
All three U.S. wheat futures markets are higher Friday morning, kicked off by continued upward movement in the Paris milling wheat contract. Adjustments to USDA's official supply and demand estimates notably included reductions in their wheat production estimates for Australia, China, Russia, and Ukraine, tightening the futures market's fundamental outlook somewhat Thursday. But overall, those tweaks took the global wheat scenario from a 0.354 stocks-to-use ratio down to a 0.348 stocks-to-use ratio, which obviously still suggests ample wheat supplies, so perhaps it's not a bullish enough story to sustain upward momentum in futures prices. In the U.S. cash market, DTN's collected SRW Index came to $4.59 Thursday (25 cents under the September Chicago contract); the HRW Index came to $4.65; the Spring Wheat Index came to $5.04; and the average cash bid for Soft White wheat was $5.11 and the average cash bid for durum was $5.25.
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