Morning CME Globex Update:
Persistent heat across Europe, to say nothing of persistent drought across the southern U.S. Corn Belt, maintains the grain markets' global supply concerns at the start of the week, but otherwise, agricultural commodity prices must fight against the bearish implications of a stronger U.S. dollar.
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Corn futures traded both higher and lower during the early part of Monday's session and may wait until later in the week to develop strong momentum in one direction or another, with the monthly batch of USDA Supply and Demand Estimates coming on Friday. Despite last week's cool temperatures, the Corn Belt (and the entire Eastern United States, in fact) has nevertheless still accumulated considerably more growing degree days than usual so far during the 2018 corn season. Corn plants are therefore likely to mature and dry down faster than usual. Especially when we consider the pockets where drought has persisted and crop conditions have deteriorated over the past week, it wouldn't be surprising to see larger portions of the crop called 'very poor,' 'poor,' or 'fair' in Monday afternoon's Crop Progress report. The areas most in need of rain, notably in Missouri, didn't receive any over the weekend. The DTN National Corn Index, an average of cash bids around the country, was $3.39 Friday, showing national average basis steady at 31 cents under the September futures contract.
Global commodity markets are showing signs of risk aversion Monday morning, with "safe" assets, like the U.S. dollar, churning higher and riskier assets more dependent on economic growth, like industrial metals and soybeans, experiencing active selling interest. It certainly doesn't help soybean oil or soybean futures prices that the Monday morning headlines still highlight China's tariff retaliation plans against U.S. tariffs. The new crop November soybean contract is lingering about 10 cents below the $9 level. Canola prices and Malaysian palm oil prices are similarly moving sideways at the start of the week. The DTN National Soybean Index came to $8.23 Friday, showing average basis bids weaker at 79 cents under the November futures contract.
The European heat wave, damaging to their wheat and developing feed grains, is forecast to continue through Tuesday, and northeastern Australia is also still dry at the start of this week, all of which encourages global wheat futures prices to maintain most of last week's gains. The September KC wheat futures contract, for instance, is one dollar per bushel higher than its harvest low from July 12. Weekend rain across the Northern Plains was somewhat disruptive to spring wheat harvest, but as the crews get busy again in the coming days, they are likely to find better yields than last year across considerably more acres than last year. DTN's collected SRW Index was $5.29 Friday (27 cents under the September Chicago futures contract), the HRW Index was $5.49 (19 cents under the September KC contract), and the Spring Wheat Index was $5.67 (46 cents under the September Minneapolis contract).
Elaine Kub can be reached at firstname.lastname@example.org
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