DTN Before The Bell Grain Comments

Global Hard Wheat Prices Surge Higher

Elaine Kub
By  Elaine Kub , Contributing Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Lightly lower movement in the U.S. Dollar Index Wednesday morning shows a market that is bouncing along on a neutral path for now, allowing corn and soybeans to also explore neutral, previously-tested trading ranges. Wheat futures, especially those representing the hard wheat varieties, are being pulled higher by harvest concerns in Europe and Russia.

Other Markets:

Dow Jones: Lower
U.S. Dollar Index: Lower
Gold: Higher
Crude Oil: Higher

Corn:

Gains of a few cents Wednesday morning keep the nearby September corn futures contract about 18 cents off its July low, but don't build any major change in the overall bearish trend. A lower U.S. dollar and otherwise mixed indications from outside markets may sustain the corn market's mild movement throughout the early part of the session. On Tuesday, the new EPA Administrator announced the agency would go ahead with plans to allow sales of E15 throughout the year, and to provide a "pathway" for biofuels made from sorghum oil. Domestic demand is what's underpinning the feed grains market right now, and these announcements were seen as supportive to that long-term demand. The average spot bid for milo (sorghum) Tuesday was $3.06 or 46 cents under the September corn futures contract. The DTN National Corn Index, an average of cash bids around the country, was $3.23, showing national average basis steady at 29 cents under the September futures contract.

Soybeans:

Considering the favorable weather forecast and bearishly large production prospects for row crops this year, soybean futures prices will struggle to build lasting rallies, and they have given back some of Tuesday's gains Wednesday morning. There are some helpful showers in the 6-10 day forecast for the western Corn Belt, and no extreme heat that would disrupt soybean plants' pod-filling stage, but after this stretch of open weather, the Midwestern heart of the Corn Belt will eventually be wanting rain rather than sunny skies. Trump is suggesting further interference in the soybean market via government programs to pay U.S. farmers. Note, however, that those government payments have no mechanism to affect the actual market price of U.S.-exported soybeans, which must still offer a 25 percent discount to South American soybeans in order to land in China at the same effective price. On Tuesday, nationwide average soybean basis remained steady at 60 cents under the August contract, bringing the DTN National Soybean Index to $7.98 per bushel.

Wheat:

The European wheat rally is off and running, with the December Euronext milling wheat contract now 11 percent above its July low after gapping higher and hitting 200 Euros per metric ton Wednesday morning (equivalent to 6.36 USD per bushel). Arbitrage opportunities allow U.S. hard wheat futures to move double digits higher to keep up with some of those gains of our export competitors. There may be more acres of U.S. spring wheat in this year's oncoming harvest, but after the first day of the Wheat Quality Council's 2018 Spring Wheat Tour, it sounds like North Dakota's yields, at least, may not be overwhelmingly higher than last year. The widely good test weights and excellent quality of this year's milling wheat crop, as so far seen in winter wheat fields across the nation, will be advantageous as the United States competes for export business against Europe's and Russia's more challenged crops. On Tuesday afternoon, DTN's collected SRW Index came to $4.84 (still 27 cents under the September Chicago contract); the HRW Index came to $4.94 (still 16 cents under the September KC contract); and the Spring Wheat Index came to $5.22 (weaker again at 33 cents under the September Minneapolis contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

(KR)

Elaine Kub