Morning CME Globex Update:
A higher dollar and lower crude oil prices could be bearish to grain prices through the Monday trading session, but soybeans have started the week with optimistic double-digit gains.
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New-crop December corn futures are starting the week 9 cents below last month's brief high and 50 cents below the high from May. Another look at the overall crop condition will come in Monday afternoon's Crop Progress report, which may show a dip in ratings but won't seriously affect traders' confidence in a 14.6-billion-bushel crop. Rain coverage over the weekend wasn't a perfect match for all the dry areas that wanted moisture, notably Missouri and some northern patches of the Corn Belt, but it was otherwise plentiful across the Southern Plains. Harvested corn and milo (and cotton) yields out of Texas have been disappointing. DTN's 2018 Digital Yield Tour, which includes data analytics from Gro Intelligence, suggests average corn yields of 194.42 bushels per acre (bpa) in Iowa, 203.53 bpa in Illinois, and 188.95 bpa in Indiana, which are generally lower than USDA's current projections. The DTN National Corn Index, an average of cash bids around the country, was $3.33 Friday, showing national average basis steady at 31 cents under the September futures contract.
Double-digit gains are lighting up the soybean chart Monday morning as the market looks forward to seeing a Chinese trade envoy arrive in Washington, D.C. this week. If you want your head to stop hurting, the first step is to stop hitting yourself with a hammer, and similar advice could be given to the U.S. and China regarding the ongoing trade war. However, these gains in the futures market are extremely vulnerable to being pulled back if expected trade progress doesn't develop, and from this week's tentative talks we're unlikely to hear anything more than a plan for more talks, which is promising but not an actual change in the market. Monsoon season has been too generous in parts of India, with two weeks of deadly flooding and rains now easing. Malaysian palm oil prices remain in a long-term downward trend and are currently more than 20% below last September's highs. In the U.S. cash grains market, the DTN National Soybean Index was $8.09 Friday, showing basis bids are steady but still dramatically weakened by the lack of export business.
Trade optimism should extend to the wheat and feed grains market, too, as North American Free Trade Agreement negotiations with Mexico are expected later this month, but wheat futures are pursuing an independent path lower Monday morning. This follows a mild pullback in the Paris milling wheat contract at the start of the week, but the overall outlook for European and Russian exportable wheat supplies remains tight. Weekend rain totals of 2 inches on some parts of Kansas helped to recharge the soil's moisture ahead of winter wheat planting season. DTN's collected SRW Index was $5.32 Friday, (average basis at 28 cents under the September Chicago futures contract); the HRW Index was $5.46 (19 cents under the September KC contract); and the Spring Wheat Index was $5.59, with a steady but still relatively-weak harvest-time basis of 49 cents under the September Minneapolis contract.
Elaine Kub can be reached at firstname.lastname@example.org
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