Morning CME Globex Update:
Despite crude oil's collapse on Monday, most other commodity markets are pursuing more stable consolidation within previously-tested trading ranges. This is remarkable for soybeans and corn, which had previously been posting day after day of fresh contract lows.
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Gains in the corn futures market Tuesday morning are small, but it feels significant, after such a sustained downward trend, to experience higher prices two days in a row. Although the U.S. corn crop's condition ratings fell in the weekly Crop Progress report Monday, the concern seems to be mainly localized in Missouri (25 percent of fields rated 'poor' or 'very poor') and Kansas (20 percent of fields in those categories), where patches of D3 Extreme Drought are persisting right through the corn pollination stage. Elsewhere, it's still a beautiful crop with large harvest prospects, and potentially early harvest prospects. In Illinois, especially, corn silking and pollination is happening much faster than usual (93 percent of Illinois corn fields silking compared to the usual expectation of 57 percent at this time of year). Since April, the Corn Belt has accumulated 200 to 400 more growing degree days than usual for this time of year. For old crop cash grain, large portions of the northwestern Corn Belt and even a few locations in Iowa still have a spot bid for corn with a $2 as the front digit. Major Midwestern corn processors have spot bids for corn from 13 to 16 cents under the September futures contract, which are typically strong summer basis bids during bin-cleaning season.
Total open interest in soybean futures has been growing during recent sessions, suggesting commercial buyers have been stepping in to lock in relatively low long-term prices, but trading volumes are more subdued at the start of Tuesday's session. Monday's NOPA crush report, showing a record-large June volume of domestic soybean processing, provided a good timing opportunity for bargain-hunters to step in to the futures market and see a turnaround. The soybean chart tried a reversal once before on July 6, which never came to anything, but eventually traders will feel that prices are sufficiently low. August futures prices have fallen a full 25 percent since the start of March. A $1.90 discount for U.S. beans compared to Brazilian soybeans also represents 25 percent of the cash value of U.S. soybeans. On Monday, nationwide soybean basis bids averaged 60 cents under the August contract Friday, bringing the DTN National Soybean Index to $7.69 per bushel.
Chicago wheat futures are experiencing a rare moment as the leader of the grains sector Tuesday morning, with 8-cent gains. Harvest progress for the Soft Red Winter wheat crop represented by that Chicago contract is well ahead of pace, with 38 percent of Michigan's winter wheat already out of the field and 87 percent of Ohio's winter wheat harvested. The spring wheat market also received bearish numbers in the weekly Crop Progress report, with 80 percent of fields rated either good or excellent, and anecdotal evidence suggesting overall yields could be large in 2018. At the Paris futures exchange, the milling wheat market is experiencing another burst of buying interest Tuesday due to continued harvest disruptions in Europe. Only if it can find willing buyers above its previous July high will that Paris milling wheat bullishness really spill over into other global wheat prices. In the U.S. cash wheat market, DTN's collected SRW Index came to $4.63 Monday (26 cents under the September Chicago contract); the HRW Index came to $4.70 (15 cents under the September KC contract); the Spring Wheat Index came to $5.00 (28 cents under the September Minneapolis contract).
Elaine Kub can be reached at firstname.lastname@example.org
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