Morning CME Globex Update:
Cotton, hog, and crude oil markets are the current highlights of the commodity markets as traders try to anticipate the effects of the approaching Hurricane Florence. But corn, soybeans, or wheat could quickly steal attention with a volatile change in price and fundamental outlook, if surprising projections are made in the monthly WASDE report, to be released at 11:00 (Central) Wednesday by the USDA.
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The majority of corn's price movements during this session will likely take place after 11 o'clock (Central), when the USDA will release its monthly batch of World Agricultural Supply and Demand Estimates. Traders are expecting relatively bearish changes in those estimates. The average guess is to see 177.4 bushels per acre making a 14.5 billion-bushel crop and 1.59 billion bushels of U.S. ending stocks in the 2018/19 marketing year. Hurricane Florence is forecast to hit the East Coast with likely catastrophic flooding late Thursday and Friday. North and South Carolina together have accounted for over 1 percent of the U.S. corn crop in recent years (their 2018 production was last estimated at 142 million bushels), and much of that crop will be vulnerable to harvest losses. Only 5 percent of North Carolina's corn has been harvested so far. The DTN National Corn Index, an average of cash bids around the country, was $3.23 per bushel Tuesday, with the average basis bid weaker at 44 cents under the December futures contract.
At 7:15 Wednesday morning, the November soybean futures contract tiptoed past its July low and posted a fresh contract low of $8.24 1/4, so there is danger that further bearish nudges in USDA's supply and demand tables could send this market over the edge. If large quantities of sell stop orders are triggered, prices could cascade lower in a volatile way. However, traders are already expecting to see a larger average yield projection (52.5 bpa) and a larger U.S. 2018/19 ending stocks projection (836 mb) than those seen in August's report. Meanwhile, the nation's second-largest hog producer, North Carolina, is bracing for a catastrophic hurricane and inland flooding that could have unknown implications for the region's soybean meal demand. Cotton and crude oil prices are also higher Wednesday morning in recognition of potential storm damage. The average soybean basis bid finally slipped to triple digits Tuesday: $1.00 under the November futures contract, putting the DTN National Soybean Index at $7.32 per bushel. And that's before harvest pressure has even started! A few northern fields planted with short-day varieties have been harvested already (3 percent of North Dakota soybean fields), but the main challenge of finding a home for 2018 soybeans remains ahead of us.
Wheat futures are a rare spot of green on the grain trading screens Wednesday morning, but may switch direction later in the day if any bearish fervor spills over from the row crops, or if this market receives its own bearish bump. The average trader expectations are for the USDA to peg 2018/19 U.S. wheat ending stocks at 938 million bushels (a little larger than the August projection after the abundant spring wheat harvest) and world wheat ending stocks at 257.2 million metric tons (a little tighter than the August projection, given the pockets of drought across the globe), so a surprise could come from any direction. The U.S. winter wheat planting progress is right on pace with its typical seasonal pattern. Going forward, the persistent rain being brought to parts of the United States during this hurricane season may of course be damaging to some other crops, but they may significantly improve the soil moisture prospects for certain portions of the Southern Plains. DTN's collected SRW Index was $4.72 Tuesday, (average basis at 47 cents under the December Chicago futures contract); the HRW Index was $4.81 (steady at 42 cents under the December KC contract); and the Spring Wheat Index was $5.13 (steady at 63 cents under the December Minneapolis contract).
Elaine Kub can be reached at firstname.lastname@example.org
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