Morning CME Globex Update:
Rallying stock markets across the globe put extra capital in the hands of commodity speculators, who may be attracted to the grain markets amid the ongoing heat and drought that challenges most exporting countries in 2018. Even double-digit gains in soybeans merely keep the chart on a sideways track.
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Grain futures are higher Tuesday morning, and although corn is up only a penny or two, it's part of a larger pattern of fundamental concern about global supplies. Amid the ongoing heat wave in Europe, bullish anxiety exists not only for milling wheat but also for feed wheat, feed barley and row crops, and U.S. feed grain prices may ultimately benefit from a keener export market. The USDA's projections for global supply and demand will be closely watched in the August WASDE report, which will be released on Friday. Outside markets have put speculators in a buying mood Tuesday, with the Chinese stock market rebounding and in the U.S. the S&P 500 Index will trade higher than it's been since Jan. 29. The DTN National Corn Index, an average of cash bids around the country, was $3.40 Monday, showing national average basis steady at 31 cents under the September futures contract. On Tuesday, USDA reported an optional origin sale of 179,000 metric tons (mt) of corn for delivery to unknown destinations during the 2018-19 marketing year.
Sure enough, the observed condition of the U.S. soybean crop has deteriorated over the past week, and now futures prices seem to post one day down, then one day up for an overall sideways direction that generally keeps the November contract under $9.05 per bushel. As of Sunday evening, 10% of U.S. soybean fields were rated either 'very poor' or 'poor,' led by drought-ravaged Missouri where a full third of the crop has such distressed ratings. The combined 'good' and 'excellent' U.S. ratings fell to 67% of the crop, at a critical time when 75% of fields are already setting pods. Precipitation in the Corn Belt's weather forecast is expected to be only light and scattered. The DTN National Soybean Index came to $8.14 Monday, showing average basis bids steady at 79 cents under the November futures contract. On Tuesday, USDA reported an export sale of 145,000 mt of soybeans for delivery to unknown destinations during the 2018-19 marketing year.
Tighter wheat futures spreads in both Minneapolis and Chicago, as well as a fresh yearly high established overnight on the September Kansas City hard red winter wheat futures contract suggests that the U.S. wheat market is still pricing in its improved demand prospects in a world where all the other big wheat exporters suffered drought in 2018. Any cash wheat offered by European sellers this week is being snapped up almost immediately by end users eager to lock in prices. Harvest in northern European countries is almost finished, so the flow of bullish yield information from that region will eventually dry up, but North American spring wheat harvest is just getting started. Final yields won't be great out of the Canadian Prairies, where areas of Saskatchewan have received less than 50% of their typical precipitation since April, and southern Alberta is receiving extreme heat warnings this week. In the U.S. cash wheat market, DTN's collected SRW Index was $5.44 Monday (30 cents under the September Chicago futures contract); the HRW Index was $5.67 (19 cents under the September KC contract); and the Spring Wheat Index was $5.83 (46 cents under the September Minneapolis contract).
Elaine Kub can be reached at firstname.lastname@example.org
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