DTN Before The Bell Grains

Morning CME Globex Update:

While the U.S. stock market flirts with fresh highs, corn and soybean futures remain backed in a corner. The row crops displayed slight gains at the start of Wednesday's session, but are otherwise in a seasonally-expected lower trend during harvest, and sudden losses in global edible oil markets may drag soybeans lower through the day. Wheat futures continue to pursue an independent bullish recovery.

Other Markets:

Dow Jones:	Lower
U.S. Dollar Index:	Higher
Gold:	Higher
Crude Oil:	Lower

Corn:

Corn prices may be a penny or two higher Wednesday morning, but not enough to change the unrelenting bearish trend seen on the chart. December corn futures have lost 22 1/2 cents in the week since USDA released its 14.8-billion-bushel crop projection. And prices may continue to shuffle lower during this harvest season, a time that is typically bearish to corn prices, and may be especially so in 2018. Farmers may be more than usually inclined to sell corn off the combine to cover cash needs, given that selling cash soybeans at today's prices would be profoundly unappealing. Thunderstorms are forecast for the Midwest the next few days, which may provide a little harvest delay and stall some of the elevators' futures selling activity. The DTN National Corn Index was $3.00 even Tuesday, showing the national average basis weaker at 44 cents under the December futures contract.

Soybeans:

Sudden drops in Malaysian palm oil futures Wednesday may weigh on arbitrageurs' outlook for soybean oil prices Wednesday, and U.S. soybean oil futures are down 23 cents. Canola futures, too, are down again Wednesday after marking fresh yearly lows Tuesday. Therefore soybean futures themselves, which started the morning with small gains, may experience spillover pressure as the trading session wears on. The North Carolina Department of Agriculture has estimated Hurricane Florence's flooding caused the deaths of 5,500 hogs (0.06% of the state's 9-million-head herd). A similarly small percentage of the state's poultry herd was lost. Soybean basis bids, already historically weak, have grown weaker in recent days. On average, U.S. country elevators are bidding $1.02 under November futures for cash soybeans, which means the flat price received by a farmer would be anywhere from $6.30 (in northwestern portions of the Corn Belt) to $7.60 per bushel (closer to Midwestern processors and the Mississippi River). Physically, soybeans in the Western Corn Belt still have nowhere to go during the ongoing U.S.-China trade war, and merchandisers throughout the industry are anticipating large inventories of soybeans that will need to be stored for many months. The November-to-March 2019 soybean futures spread was growing even wider Wednesday morning, offering carry as much as 28 cents per bushel.

Wheat:

Global wheat prices remain in lock-step Wednesday morning, with European, Australian, and U.S. markets for milling-quality wheat all moving higher to roughly the same degree. Nearby Kansas City wheat futures, for instance, are up 7 1/2 cents per bushel. The latest damage to global wheat supplies came in the form of weekend frost in Western Australia, which is still being assessed, but it just joins a long series of troubles seen in 2018, including drought in Europe and the Canadian Prairies. So as export business comes to the market, from Japan, Turkey, Egypt, etc., U.S. wheat supplies are facing a good chance. Outside markets on Wednesday shouldn't hinder wheat's higher movement, with the U.S. dollar index near unchanged and the stock market toying with fresh record highs. In the cash wheat market, DTN's collected SRW Index was $4.64 Tuesday, (average basis steady at 47 cents under the December Chicago futures contract); the HRW Index was $4.75 (steady at 41 cents under the December KC contract); and the Spring Wheat Index was $5.18 (steady at 63 cents under the December Minneapolis contract).

Elaine Kub can be reached at elaine@masteringthegrainmarkets.com

FollowElaine on Twitter @elainekub

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