Morning CME Globex Update:
U.S. wheat prices continue to follow the European wheat rally, and corn prices continue to follow soybeans' day-to-day mood about trade prospects, which on Thursday is much improved. A relatively strong weekly export sales report received muted reaction in the already-higher futures market. It showed 1,086,000 metric tons of corn sold (total for both marketing years), 1,502,000 metric tons of soybeans sold (total), and 385,900 metric tons of wheat.
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Six-cent gains in the corn market Thursday morning demonstrate traders' confidence that the worst of the bearishness may be behind us. At $3.79 1/4, the new crop December corn contract is almost 30 cents above its low from July 12, and it's struggling to keep up with the more rapid gains in the soybean market and especially the soybean meal market in active early trade. Thursday's export sales report showed 338,500 metric tons of 2017/18 corn sold and 747,500 metric tons of 2018/19 corn sold, which may be disappointing to the market. The DTN National Corn Index, an average of cash bids around the country, was $3.30 Wednesday, showing national average basis steady at 29 cents under the September futures contract.
Just as the stock markets rejoice when two big global trading partners start to get along, so also have the soybean prices gone up after talks between the U.S. and the EU on Wednesday discussed reducing tariffs and trade barriers. There was even a commitment for the EU to buy "a lot of" soybeans, although no one really knows how much "a lot" is. You might say there was "a lot" of soybean sales shown in the weekly export sales report: 538,200 metric tons of old crop beans (up 69 percent from the 4-week average), and 963,800 metric tons of new crop beans. Overall, traders appear to be in an optimistic buying mood Thursday morning, with green on the screens for a broad variety of markets. On Wednesday, nationwide average soybean basis weakened to 61 cents under the August contract, bringing the DTN National Soybean Index to $7.99 per bushel.
Variable yield estimates from the 2018 Wheat Quality Council's Spring Wheat Tour might on their own have sparked an outlook for higher prices, but this week that outlook has been dramatically boosted by a foreign wheat price rally. The sudden bullishness and higher movement on the Euronext milling wheat futures chart has left gaps that will eventually need to be filled when the market heads back downward, but in the meantime, it's clear that wheat buyers are spooky and worried about sourcing enough high-quality milling wheat from typical export giants like Russia, Ukraine, France, Germany, and Poland. Australian wheat prices, too, have been climbing during a dry, hot growing season and amid expectations for more hot weather when the wheat starts heading in coming weeks. Drought in the Canadian Prairies has improved over the summer but still persists in areas of Saskatchewan and Manitoba. So when looking for big exporting countries with ample 2018 wheat yields, there is pretty much only the United States, where the futures markets seem willing enough to follow along with the global herd. Obviously, there was no evidence yet of rampant demand in the weekly export sales report, which showed 385,900 metric tons of wheat sales. Minneapolis spring wheat prices are still more than $2 below last year's highs, but KC hard wheat futures could, within 25 cents, pierce their previous high from this May. On Wednesday afternoon, DTN's collected SRW Index came to $5.15 (still 27 cents under the September Chicago contract); the HRW Index came to $5.24 (17 cents under the September KC contract); and the Spring Wheat Index came to $5.51 (weaker again at 37 cents under the September Minneapolis contract).
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