Morning CME Globex Update:
Lower grain and oilseed prices on foreign futures exchanges, including a sudden drop in Malaysian palm oil and a pullback in Paris milling wheat, set the tone for U.S. corn, soybean, and wheat futures trade overnight. Bearish fundamentals, like this week's favorable crop condition ratings and the ongoing Chinese tariff situation, also encourage these markets to give back some of their recent gains.
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Considering the favorable weather forecast and bearishly large production prospects for row crops this year, corn futures prices will struggle to build lasting rallies, and they are giving back the gains of the past two sessions during active trade Tuesday morning. The 2018 corn crop still looks beautiful, with 72 percent of fields still rated either good or excellent in the Crop Progress report, and is still widely expected to produce well more than 14 billion bushels of corn. The sorghum crop, also hedged with corn futures contracts, has been struggling a little more in the dry Southern Plains, and only 49 percent of fields are rated good or excellent. The EPA is expected to make an announcement Tuesday about the use of sorghum in biofuels, which could affect the profitability and the size of the domestic market for that grain. The nationwide average spot bid for milo (sorghum) Monday was $3.11 or 46 cents under the September corn futures contract. The DTN National Corn Index, an average of cash bids around the country, was $3.28 Monday, showing national average basis stronger at 29 cents under the September futures contract.
According to the weekly Crop Progress report, U.S. soybeans aren't just healthy overall, they've grown even healthier in the past week, and they're way ahead of pace for this time of year, with 44 percent of fields already setting pods as of Sunday night. Seventy percent of soybean fields were rated either good or excellent. Prices turned lower when overnight trade began after this report, and not only that, the new crop November contract's immediate drop left a penny-wide gap on the chart, which may eventually get filled whenever prices move back above $8.61 per bushel. Malaysian palm oil prices dropped almost 2 percent during their Tuesday session, adding to the bearishness for global oilseed prices. Back in the U.S. cash market, nationwide average soybean basis remained steady at 60 cents under the August contract, bringing the DTN National Soybean Index to $7.88 per bushel Monday.
Wheat prices are lightly lower Tuesday morning, with the Chicago contracts seeing the heaviest volume of algorithmic selling overnight. Harvest reports from Europe and the Black Sea region suggest there have been particularly poor yields in Poland and southern Russia, but generally disappointing yield results have also been noted in other big exporting countries: the UK, France, and Ukraine. The December Paris milling wheat chart therefore surged as high as 195.5 Euros Monday (equivalent to 6.23 USD per bushel), but is pulling back now Tuesday. Prices for milling wheat varieties here in the United States are also willing to head back downward, given the bearish production expectations for domestic spring wheat. Only a tiny percentage of U.S. spring wheat fields, 4 percent, were rated poor or very poor in this week's Crop Progress report, and after seeing planted acreage go up 20 percent year over year, the spring wheat market is now anticipating a large crop once harvest fires up through the next several weeks. The December-to-March futures spread in Minneapolis has extended as wide as 17 3/4 cents Tuesday morning. Cash spring wheat merchandisers have been resisting the recent price gains by softening their basis bids. National average spring wheat basis weakened again Monday to 32 cents under the September Minneapolis contract, putting the Spring Wheat Index at $5.30 per bushel. DTN's collected SRW Index came to $4.87 (still 27 cents under the September Chicago contract), and the HRW Index came to $4.95 (still 16 cents under the September KC contract).
Elaine Kub can be reached at email@example.com
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