DTN Closing Grain Comments

Winter Wheat Posts Unexpected Rally

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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(DTN illustration by Nick Scalise)

General Comments:

Corn closed up 5 1/4 cents in the July contract and was up 5 1/4 cents in the December. Soybeans closed down 2 3/4 cents in the July and down 3 1/2 cents in the November. Wheat closed up 17 3/4 cents in the September Chicago, up 16 1/2 cents in the September Kansas City, and down 3/4 cent in the September Minneapolis. The September U.S. dollar index is down 0.78 at 94.32. August gold is up $3.70 at $1,254.70 while July silver is up 13 cents and July copper is unchanged. The Dow Jones Industrial Average is up 221 points at 24,437. August crude oil is up $0.67 at $74.12. August heating oil is up $0.0243 while August RBOB gasoline is up $0.0400 and August natural gas is down $0.014.

For the week:

July corn closed down 7 cents and December was down 6 3/4 cents. July soybeans were down 36 cents while the November was down 36 1/4 cents. September Chicago wheat was down 3 cents, September Kansas City wheat was down 17 cents, and September Minneapolis wheat was down 24 1/4 cents.

Corn:

December corn gained 5 1/4 cents to $3.71 1/4 Friday, not so much from USDA's report, which was slightly bearish, but more likely coming from two weather concerns. First, flooded areas in the north-central Corn Belt are expecting more rain in the next seven days and, second, much of the Corn Belt will be experiencing hotter temperatures, just as corn crops are getting ready to pollinate, with nighttime lows staying well above average. Heat at night hurts yields and it is unclear yet how long this new-crop threat might hang around. In addition to Friday's bullish weather concerns, we have been wondering out loud ever since last week's panicked sell-off when USDA's estimate of lower world ending corn stocks might show up as visible support for prices and that was probably also a factor on Friday. USDA said 89.1 million acres of corn were planted in 2018 and we have to think some will be lost to June's flooding. U.S. corn stocks of 5.31 billion bushels on June 1 was more than expected and suggested USDA's U.S. ending corn stocks estimate may be roughly 200 million bushels too low for 2017-18. Technically, the trend in corn remains down and Friday's rally probably sent some shorts scrambling for cover. DTN's National Corn Index closed at $3.19 Thursday, its lowest price in five months and 35 cents below the September contract. In outside markets, the September U.S. dollar index was down 0.78 after European leaders reached a deal on migration that was seen as favorable for the euro.

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Soybeans:

November soybeans ended down 3 1/2 cents at $8.80 Friday, unable to hold earlier gains after USDA estimated soybean plantings at 89.6 million acres. If the estimates hold true, soybean plantings in 2018 are now slightly above corn acres for the first time since 1983. USDA also said 1.22 billion bushels of U.S. soybeans were in storage on June 1, roughly as expected and an indication that soybean demand will likely be slightly lower in 2017-18 than it was a year ago. On the topic of demand, USDA said earlier Friday that 4.8 million bushels (130,632 mt) of new-crop soybeans were sold to Mexico. Overnight news that China would ease restrictions on foreign investment could have been bullish for soybeans, but traders are still wary about next week's July 6 deadline for China's new 25% tariff on U.S. soybeans. Except for flooding in June, soybean crops are in generally favorable condition and we will have to see how long next week's heat wants to hang around the Midwest. Bearish pressure from the trade dispute with China remains relentless so far, but that is also the kind of thing that could change quickly, depending on how negotiations go behind closed doors. This could be a volatile summer for soybean prices, but so far, the trend remains down. DTN's National Soybean Index closed at $8.02 Thursday, its lowest close in nine years and priced 65 cents below the August contract.

Wheat:

September Chicago wheat closed up 17 3/4 cents and September K.C. wheat was up 16 1/2 cents at $4.88 1/2, possibly catching shorts off guard with unexpected buying on a Friday that also happens to be the end of the quarter and in front of a four-day week. It was also odd that Friday's rally happened after Statistics Canada estimated Canada's all wheat plantings at 24.7 million acres, down a little from the March estimate, but still up 10% from a year ago. Here in the U.S., all wheat plantings were estimated at 47.8 million acres, higher than expected because spring wheat plantings came in at a higher-than-expected 13.2 million acres. USDA estimated U.S. wheat stocks at 1.10 billion bushels on June 1, as expected and representing the end of the 2017-18 season. Given the unexpected rally in winter wheat on Friday, it will be interesting to see if prices can hold up when U.S. traders return Sunday for the start of a four-day week. In spite of Friday's higher winter wheat prices, the trends in all three wheats remain down. DTN's National SRW Index closed at $4.57 Thursday, up from its lowest price in two months and 26 cents below the September contract. DTN's National HRW Index closed at $4.54, near its lowest price in two months.

Todd Hultman can be reached at todd.hultman@dtn.com

Follow Todd Hultman on Twitter @ToddHultman1

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Todd Hultman