Morning CME Globex Update:
A more positive trade relationship with Mexico, including a good chunk of corn business in the weekly export sales report, is supportive to grain futures prices Thursday morning, but not explosively bullish. A lower dollar and a higher stock market have allowed energy prices and other consumer commodities to pursue and upward path in recent trading sessions.
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At a time when export prospects are top-of-mind for corn traders, the weekly export sales report confirmed the friendlier trade relationship with Mexico: over 25 percent of the 525,000 metric tons of new crop sales put on the books last week were bought by Mexico. And there's potential for headlines to pop up at the end of this week regarding a full three-country NAFTA agreement, which may be supportive to corn prices Thursday. On the other hand, given the dominance of domestic demand on the U.S. corn supply-and-demand balance sheet, the corn futures market was never as deeply damaged by tariff troubles as soybeans or pork, for instance. Outside markets are supportive for grain prices Thursday, with the stock market pursuing fresh record highs day by day, the U.S. dollar slowly pursuing a two-week downward trend, and crude oil leading commodities higher during the same timeframe. In the cash market for remaining old crop corn bushels, the DTN National Corn Index, an average of cash bids around the country, was $3.09 Wednesday, showing national average basis steady at 32 cents under the September futures contract. At 8 a.m. USDA reported 100,611mt of corn sold to Mexico for delivery in 2018-2019.
The new crop November soybean chart continues to flit within 10 cents of re-touching its July low at $8.26 1/4, as the bearish status quo continues. Large U.S. production prospects and a poor trading relationship with China, the typical number one soybean customer, are still the main concerns. This week's export sales report, which showed 110,900 metric tons of old crop soybean sales and 591,600 metric tons of new crop soybean sales, came in at the lower end of expectations. The Brazilian real has bounced along near a 4-year low in recent sessions, allowing global soybean prices to linger in a similar sideways pattern. The cash market for soybeans is historically weak and still growing worse day by day. The DTN National Soybean Index showed nationwide average basis bids weaker again on Wednesday, now 94 cents under the November contract, or $7.42 expressed as a flat price.
There are still rumblings that Russia may eventually put a limit on how much of this year's wheat it will allow to be exported after the hot, dry summer limited production, and those concerns kept the Paris milling wheat futures market headed upward overnight, with U.S. wheat futures taking the same direction. The 414,800 metric tons of wheat sales on this week's export sales report were within the range of traders' expectations. Long futures positions will be recorded as of the close of the Thursday's session in advance of First Notice day for September grain and oilseed futures contracts coming up Friday. DTN's collected SRW Index was $4.88 Wednesday, (average basis weaker at 28 cents under the September Chicago futures contract); the HRW Index was $5.01 (still 19 cents under the September KC contract); and the Spring Wheat Index was $5.23, showing basis bids starting to recover (46 cents under the September Minneapolis contract) now that the gut slot of harvest has passed.
Elaine Kub can be reached at firstname.lastname@example.org
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