Morning CME Globex Update:
Double-digit wheat gains are keeping support in the overall grain and oilseed sector so far Friday morning, but soybean prices are dangerously near their July lows and are continuously pressured by volatility in the Brazilian and Argentinean currency markets. Traders may close out positions ahead of the Labor Day holiday, and these markets' direction could change.
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Corn prices have been holding steady inside a 5-cent trading range during the past three trading sessions and are lightly higher at the start of Friday. 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, and any positive news about the Canada-Mexico-U.S. trading relationship Friday will be supportive to corn prices but not explosively bullish. Recent higher moves in the stock market and crude oil have been moderately supportive to grains, but those consumer markets are seeing an end-of-week pullback Friday ahead of the three-day Labor Day holiday. 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 Thursday, showing national average basis steady at 47 cents under the December futures contract.At 8 a.m. USDA reported 273,800 mt of corn sold to unknown destinations for delivery in 2018-2019.
The last time the November soybean chart explored a price as low as the $8.28 3/4 seen overnight was during the panicky July 16 session. At the time, the 22 percent drawdown in soybean prices was considered necessary, in relationship to Brazilian cash soybean prices, to account for the Chinese tariffs on U.S. beans. But the world has changed in the past seven weeks, notably with a cheaper Brazilian real (streaking to fresh lows again overnight), and a collapsing Argentine peso, and an increasingly confident outlook for large U.S. soybean production prospects now that the crucial August weather window is closed. In terms of cash soybean prices, the DTN National Soybean Index, at $7.37, is now lower than it's been since December 2008. Basis bids are historically weak and still growing worse day by day (the national average basis bid was weaker again at 95 cents under the November contract Thursday). The soybean futures market has held steady so far Friday, but there is considerable risk that prices could sink below support levels and trigger a sudden sell-off. At 8 a.m. USDA reported 250,000 mt of soybeans were sold to unknown destinations for delivery in 2018-2019.
All three U.S. wheat futures contracts, as well as European milling wheat and feed wheat futures, are collectively moving higher on Friday, which is First Notice day for September grain and oilseed contracts and the last session before the markets take a 3-day Labor Day weekend. Grain futures trade will resume at 7 p.m. (Central) Monday. There are persistent regions of drought in the U.S. Southern Plains as winter wheat planting approaches, although recent rains have improved the situation and the weekend forecast also includes some showers. The outlook for the Eastern Australian drought looks similar: they received some rain and are expecting some showers in the forecast, but not enough to turn around the wheat crop's prospects. DTN's collected SRW Index was $4.81 Thursday, (average basis steady at 54 cents under the December Chicago futures contract); the HRW Index was $4.95 (46 cents under the December KC contract); and the Spring Wheat Index was $5.18, showing basis bids recovering now that the gut slot of harvest has passed (66 cents under the December Minneapolis contract).
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