Morning CME Globex Update:
Trouble in emerging markets (notably Turkey) is having global implications Friday morning, dampening the economic confidence that otherwise could have the U.S. stock market approaching a record high, and sending investors into the safe haven U.S. dollar. A higher U.S. dollar is, of course, bearish to dollar-denominated commodity prices, but this will all likely be outweighed by fresh USDA supply and demand estimates released during Friday's trading session.
|U.S. Dollar Index:||Higher|
The U.S. dollar started surging higher Thursday due to weakness in emerging markets' currencies, and not coincidentally, grain prices have turned downward ever since. The U.S. dollar index hit a fresh yearly high overnight. Corn futures are 1/4 or 1/2 a penny lower, with the new crop December contract still above $3.80. However, the August batch of World Agricultural Supply and Demand Estimates will be released by the USDA at 11 a.m. CT Friday and is highly likely to motivate movement in the corn market in one direction or another. Traders' pre-report estimates are expecting 2018-19 U.S. corn ending stocks at 1.630 billion bushels (bb) and world ending stocks at 152.2 million metric tons (mmt), both increases from the July projections. The DTN National Corn Index, an average of cash bids around the country, was $3.38 Thursday, showing the national average basis steady at 31 cents under the September futures contract.
The August WASDE report to be released Friday should be more confident about yields and more influential to the markets than usual, given how rapidly the row crops have developed during the early accumulation of growing degree days in the summer of 2018, and it's expected to show bearish adjustments to row-crop yields since the previous July estimates. From 48.5 bushels per acre (bpa) soybeans and 174 bpa corn in the July report, traders are now expecting to see 49.8 bpa soybeans and 176.3 bpa corn at 11 a.m. CT Friday. Expectations aren't always met, however, and market participants should be prepared for volatility during the trading session. Otherwise, the soybean charts have been on a sideways track this week, with trade tensions still in their bearish status quo. The DTN National Soybean Index came to $8.23 Thursday, showing average basis bids weaker at 81 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 cents to 30 cents, ostensibly due to the dearth of upcoming export business. The U.S. Department of Agriculture reported on Friday export sales of 210,000 metric tons (mt) of soybeans for delivery to unknown destinations. Of the total 80,000 mt is for delivery during the 2017-18 marketing year and 130,000 mt is for delivery during the 2018-19 marketing year.
U.S. wheat futures may renew their bullish direction Friday if USDA tightens its domestic- and global-ending stocks projections, as expected. However, cash prices for spring wheat have been resisting some of the higher movement while relatively comfortable supplies are coming in from the ongoing harvest. Average spring wheat basis has more than doubled over the past month: now 49 cents under the September Minneapolis contract, or $5.81 Thursday. The September-to-December futures spread in Minneapolis tells a similar tale of comfortably full elevators through the end of the year, but going further into the 2018-2019 marketing year, global wheat buyers may increasingly look to the U.S. for high protein milling wheat. Global wheat production numbers from the USDA will be especially interesting Friday after so many major wheat-exporting countries have experienced drought this summer (and Australian winter wheat is still being damaged by drought). DTN's collected SRW Index was $5.36 (weaker at 29 cents under the September Chicago futures contract); and the HRW Index was $5.58 (also weaker at 20 cents under the September KC contract).
Elaine Kub can be reached at firstname.lastname@example.org
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