Morning CME Globex Update:
Through the early part of Thursday's trading session, the grain futures markets shrugged off outside market implications like a stronger dollar and a sinking crude oil price. Instead, they focused on their own supply and demand concerns, looking globally toward poor production prospects in major exporting regions. U.S. soybean prices, so far, are still hamstringed by a U.S.-China trade war.
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The heat and dry conditions in Europe and the Black Sea region, which has so far been the driver of a recent global wheat rally, is now persisting long enough to become a concern for other exported feed crops, too, and Euronext corn futures have jumped over 10 Euros per metric ton so far this week. U.S. corn futures are only 3 to 4 cents higher Thursday morning, with any potential bullishness heavily dampened by the abundant production prospects in this country. The USDA is likely to project a higher U.S. yield than 174 bushels per acre in its next round of estimates due next Friday. But even the weather in northern China is a little dry, too, at the start of August, so a shift in the global feed grains' supply outlook may be in the works. Average daily ethanol production came to 1.064 million barrels in the weekly EIA report (a slight dip from last week), and there were 1,278,100 metric tons of total sales in the weekly export sales report. The DTN National Corn Index, an average of cash bids around the country, was $3.42 Wednesday, showing national average basis steady at 30 cents under the September futures contract.
As the new crop November soybean contract gradually slipped lower overnight, there was eventually an absence of supportive buyers above$9, and the chart is now five cents below that level in early Thursday trade. Since trading volume has so far been relatively quiet, it's possible that fresh interest will come in throughout the day and change the market's direction to move higher alongside the grains, especially if there are any hints in the news about potentially normalizing the trade relationship with China. This week's export sales report showed 637,000 metric tons of sales for both marketing years, which was squarely within the market's expectations. The DTN National Soybean Index came to $8.24 Wednesday, showing average basis bids steady at 78 cents under the November futures contract.
Wheat futures should be expected to continue higher until the European rally wears itself out, which it shows no signs of doing on Thursday. The December Euronext chart opened a gap and hit its highest level since 2014, at 214.50 Euros per metric ton (equivalent to gains of 20 cents per bushel on a U.S. chart). A stronger U.S. dollar on Thursday will somewhat restrict U.S. wheat futures' ability to follow along, to say nothing of the more comfortable domestic supply outlook. As spring wheat harvest gets going and merchandisers anticipate at least 20 percent more bushels than last year to come into their bins, due to increased acreage if not much increased yield, they continue to shade their basis bids. Average spring wheat basis weakened again Wednesday, to 42 cents under the September Minneapolis contract, bringing the Spring Wheat Index to $5.66. The HRW Index was $5.46 per bushel.
Elaine Kub can be reached at email@example.com
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