December corn was down 1 3/4, November soybeans were down 4 1/4, and December MPLS wheat was up 1/4.CME Globex Recap:
Global equity markets are sharply lower again this morning after yesterday's bloodbath proved to be the largest single-day loss since the 2016 Brexit vote. The selloff in US and global debt, which prompted higher yields, finally spooked investors who became worried about sustained economic growth. Energies are also sharply weaker with crude oil now $5.00/bbl off recent highs. Grains are lower but look like a port in a storm compared with other asset classes. WASDE on tap at 11:00am CDT.OUTSIDE MARKETS:
Previous closes on Wednesday showed the Dow Jones Industrial Average down 831.83 points at 26,598.74 and the S&P 500 down 94.66 points at 2,785.68 while the 10-year Treasury yield ended at 3.165%. Early Thursday, DJIA futures were down 296.00. Asian markets were sharply lower with Japan's Nikkei 225 down 915.18 points (-3.89%) and China's Shanghai Composite was down 142.38 points (-5.22%). European markets are lower with London's FTSE 100 down 127.42 points (-1.76%), Germany's DAX down 148.08 points (-1.26%), and France's CAC 40 down 76.88 points (-1.48%). The euro was up 0.00170 at 1.15465 and the U.S. dollar index was down at 95.3280. September 30-year T-Bonds were up 0.84% while December gold was up $10.50 at $1203.90 and November crude oil was down $1.35 at $71.82. Soybeans on China's Dalian Exchange closed down 0.19% and soymeal closed up 0.61%.
|1)||President Trump has announced his intention to allow gas stations to provide E15 year-round with approval expected by the 2019 driving season.||1)||China's Feed Industry Association projects soymeal inclusion rates can drop 8% in hog rations, allowing soybean imports to drop another 10-13MMT.|
|2)||After a set-back last week on improved rain chances, Australian wheat prices rallied back to A$441.00/MT today, within A$9 of contract highs.||2)||Russia's Ag Minister increased his estimate of this year's wheat crop to 68-69MMT vs. 64.4MMT last month and 70MMT by the USDA.|
|3)||Along with equities, commodities as an asset were sold Wednesday but not by nearly as much. The S&P 500/Bloomberg Commodity Index ratio closed at 32.18 yesterday, the lowest print since July 9th.||3)||Oats and oat spreads finally broke Wednesday as weather forecasts suggest a resumption of harvest. Canada is the world's largest oat exporter, supplying the US with 50% of its total supply.|
CORN December corn is weaker, attempting to close lower for the fourth session in a row which would be the longest losing streak since mid-August. Cash and spreads drifted lower with the softer board as river logistics are finally improving and harvest progress should ramp back up next week. The southern plains and Mid-South regions will remain active with precip through the weekend and into next week, but the central and northern Corn Belt should see dry weather well into the 7-10 outlook. The big focus today will obviously be NASS's updated take on the national average corn yield which is expected to rise by 0.5bpa to 181.8bpa. Brazilian data will also be on tap later this morning when CONAB updates data sets while the USDA Ag Attaché updated his corn production number for the country Wednesday, pegging the crop at 95MMT vs. 81.3MMT in 2017/18. The demand side of the balance sheet should be fairly quiet on today's WASDE, although USDA could increase export demand by 50-100mbu based on performance to-date. December corn should find good support around 3.60 which is the 38.2% retracement of the most recent 3.42-3.69 rally.
SOYBEANS November soybeans are weaker for the third session in a row, slipping back below the 50-day moving average. The average trade estimate for today's WASDE expects the national average soybean yield to rise by 0.4bpa to 53.2bpa. In-turn, after demand side changes, carryout is expected to rise to 896mbu from 845mbu last month. We have expressed concern the carryout number could rise even higher based on the poor export demand so far this marketing year. We contend the current 2.060bbu export demand estimate from the USDA does not fully take into account the loss of Chinese demand. Some private analysts expect the full year export estimate could end up 100-200mbu below the USDA's current number. That is not priced in to today's futures in our opinion. Like corn, CIF soybean bids drifted lower yesterday on better river logistics and a resumption of harvest next week. The early week strength on the front-end of the curve evaporated with SX/SF trading back out to -14.00c this morning vs. a -12.75c high on Monday. Barring a major surprise from the USDA, the market will quickly shift its focus to weekly demand estimates and South American planting pace/weather.
WHEAT Wheat prices are weaker, in keeping with corn and soybean prices as we stumble into the WASDE. The bright spot of late has been Minneapolis spring wheat with the surprise export business to Bangladesh and slow harvesting conditions in Canada. The MWZ/MWH calendar spread rallied into -9.75c on Wednesday, the strongest trade since August 10th and 1/4c away from the strongest level since June 1st. Grabbing headlines today was the Australian Bureau of Meteorology increasing their odds of an El Nino weather pattern this winter to 70%. El Nino's can be associated with adverse growing conditions in Brazil and Australia, but after back-to-back drought years, I'd say Australians are willing to roll the dice with El Nino. There have been some dryness and frost concerns popping up in Argentina which could temper production ideas a bit. However, their FOB offers remain the cheapest in the world Dec-forward. To be honest, some are scratching their heads as to why Argentina would offer wheat $23/MT below the rest of the world if they don't have to. Canadian offers remain hot with their export capacity booked through December. Until harvest weather resumes, bids should be kept under MW/KW, especially with firmer spot floor trades. Should be a quiet report today with ending stocks expected to rise to 955mbu from 935mbu last month, although the focus should be on Russian and Australian updates to production and exports.
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Tregg Cronin can be reached at firstname.lastname@example.org
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