Morning CME Globex Update:
The S&P 500 Index is expected to open within 15 points of its record high from January 26, but an ongoing trade war between the world's two largest economies weighs on the otherwise bullish outlook, not only for stocks but of course also for soybeans. This was emphasized in the weekly export sales report, which showed combined sales of 954,400 metric tons of soybeans, 317,100 metric tons of wheat, and a more favorable 1,212,200 metric tons of corn.
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The new crop December corn futures contract has so far remained inside a narrow 6-cent trading range under $3.88 this week, but the monthly World Agricultural Supply and Demand Estimates will be released by the USDA at 11 a.m. (Central) Friday, and those reports typically contribute some volatility to the markets in one direction or another. Analysts surveyed ahead of the report expect the projections to show 2018 U.S. corn yield at 176.3 bushels per acre, making a 14.6 billion-bushel crop despite some localized flooding and wider dry regions during this growing season. Last week's ethanol production was reported at 1.100 million barrels per day, which is very close to the record high from last December, and part of a long-term bullish trend in corn usage. The weekly export sales report showed 1,212,200 total sales for both marketing years, and the business for old crop sales was up 90 percent over last week's numbers. The DTN National Corn Index, an average of cash bids around the country, was unchanged at $3.40 Wednesday, showing national average basis steady at 31 cents under the September futures contract.
Despite heat in the Nothern Plains and diminishing soil moisture across the Midwest and southern tier of the Corn Belt, the USDA is nevertheless expected to project 2018 soybean yields higher in their August supply and demand report (49.8 bpa) than they did in the July report (48.5 bpa). But there is a whole trading session to get through, first, and the soybean market received a neutral export sales report Thursday morning, showing 954,400 metric tons of total sales for both marketing years. A couple of European destinations stepped up their soybean purchases (the Netherlands, Spain, Switzerland) to offset reductions in Chinese business. The U.S.-China trade war which originally caused soybeans to lose $2 per bushel since May is still ongoing, and the U.S. intends to impose another $16 billion of tariffs starting August 23rd. The DTN National Soybean Index came to $8.31 Wednesday, showing average basis bids steady at 80 cents under the November futures contract. Compared to what would be "normal" for this time of year, basis bids at the Gulf, at Midwestern processors, and at country elevators are all depressed by 20 to 30 cents, ostensibly due to the lack of upcoming export business. At 8:00 a.m. USDA reported 135,000 metric tons of soybean cake and meal for delivery to the Philippines during the 2018/2019 marketing year.
Wheat futures are lightly lower Thursday morning, and the weekly export sales report bearishly showed only 317,100 metric tons of wheat sales. On Wednesday, the entire state of New South Wales in Australia was officially declared in drought, and forecasts expect the drought to continue for months while their winter wheat would be heading. So the tighter global supply outlook, which recently boosted European wheat futures to a four-year high, isn't only influenced by dry weather in Europe and Russia, but also by dry weather in other major exporting countries, including Australia and Canada. In the U.S. cash wheat market, basis bids were mostly steady Wednesday, except for spring wheat basis which continues to grow weaker day by day as the gut slot of harvest approaches. The average basis bid for spring wheat was 48 cents under the September Minneapolis contract Wednesday, taking the Spring Wheat Index to $5.85 per bushel. DTN's collected SRW Index was $5.42 (28 cents under the September Chicago futures contract); and the HRW Index was $5.65 (19 cents under the September KC contract).
Elaine Kub can be reached at firstname.lastname@example.org
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