Morning CME Globex Update:
The soybean market's corrective bounce looks set to continue for another day, allowing corn and wheat to also experience some lightly higher trade Wednesday morning. Economic optimism and an outlook for higher interest rates are driving the U.S. dollar higher, which could put some pressure on commodities.
|U.S. Dollar Index:||Higher|
Corn futures have a chance to post three straight days of gains this week, and the recent sustained buying activity has pulled the new crop December chart as much as 12 cents off its contract low. Showers are forecast in areas of northwestern Iowa and southeastern South Dakota, where additional moisture will be unwelcome after recent flooding. The Fed chairman made comments to Congress that expressed confidence in the U.S. economy and a willingness to allow inflation to exceed 2 percent per year, all of which has sent interest rate expectations and the U.S. dollar moving higher Wednesday morning. If the Dollar Index exceeds its previous June high, the dollar-denominated grain markets may start to feel additional pressure. Cash grain bids collected Tuesday afternoon showed the DTN National Corn Index at $3.15 or 31 cents under the September futures contract.
Soybeans continue to be the leader of the grain and oilseed sector Wednesday morning by bouncing upward by an additional 5 cents. Soybeans don't like "wet feet," they say, and the excessive moisture across northern Iowa and southern Minnesota and Wisconsin may be starting to stress soybean fields in that region. Total open interest in soybean futures has continued to grow over the past week, suggesting it's not just profit-taking short covers that have boosted prices, but instead, that futures buyers are motivated by bargain prices to establish fresh long positions, even in far-deferred contracts. As of Wednesday morning, it's still possible to buy soybean futures below the $9 level as far out as 2020. On Tuesday, nationwide average soybean basis remained steady at 60 cents under the August contract, bringing the DTN National Soybean Index to $7.79 per bushel. At 8 a.m., USDA reported 199,500 mt of soybeans were sold to Pakistan for delivery in 2018-2019.
As the benchmark front-month Chicago wheat chart peeks above the $5.00 level Wednesday morning, it is trading at almost the midpoint of the contract's trading range seen so far in 2018. Producers with spring wheat to sell, on the other hand, will find a market that's down 15 percent through this year, driven lower by favorable weather and yield prospects in the Northern Plains. Paris Euronext milling wheat futures continue to push higher and could spark a serious rally if buyers become willing to push the December contract above 190 Euros per metric ton. The bullishness in the European market reflects ongoing concern about what the final production numbers will be after a dry summer in that region and extremely variable reports of harvested yields. In the U.S., ongoing winter wheat harvest is similarly challenged by rain on Wednesday, and where the combines have been running, they've found widely variable yields in Nebraska and Colorado. DTN's collected SRW Index came to $4.72 Tuesday (still 26 cents under the September Chicago contract); the HRW Index came to $4.76 (still 15 cents under the September KC contract); the Spring Wheat Index came to $5.05 (still 28 cents under the September Minneapolis contract).
Elaine Kub can be reached at firstname.lastname@example.org
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