DTN Closing Grain Comments

General Comments:

May corn closed up 1 3/4 cents per bushel and December corn was up 1 1/2 cents. May soybeans closed up 3 1/4 cents and November soybeans were up 2 3/4 cents. May KC wheat closed down 1 1/4 cents, May Chicago wheat was down 1 1/2 cents and May Minneapolis wheat was up 7 1/4 cents. The June U.S. dollar index is trading down 0.066 at 96.545. The Dow Jones Industrial Average is down 26.54 points at 26,124.04. June gold is up $3.80 at $1,312.10, May silver is unchanged at $15.21 and May copper is down $0.0115 at $2.9225. May crude oil is up $0.60 at $64.58, May heating oil is up $0.0407, May RBOB is up $0.0675 and May natural gas is up $0.001.

Corn:

Following USDA's April crop report, which attempted to account for the March 1 higher-than-expected corn stocks, corn is now sitting about six cents above the new contract low set Tuesday. USDA slashed demand in three distinct categories, reducing feed and residual by 75 million bushels, corn used for ethanol by 50 mb and exports by another 75 mb, sending the U.S. carryout above 2 billion bushels again to 2.035 bb. Such an ending stocks number compares to 2.014 bb in 2017-18, and 2.230 bb in 2016-17. Some analysts even contend USDA did not go far enough in reducing feed and residual and may still be overstating by 75 mb to 100 mb. Just as U.S. supply surged, so did the world's, with an increase of 6 mmt (236 mb) corn ending stocks. Increases in corn production of 1.5 mmt in Brazil, 1 mmt in both Argentina and Mexico, and 2 mmt in the EU set the stage for continued stiff competition for U.S. corn export sales in the summer. Between Brazil and Argentina, their combined increase in corn production will be 29 mmt, or 1.141 billion bushels! The saving grace for corn may be a China trade deal. Analysts continue to ponder potential for China to buy as much as 20 mmt of U.S. corn along with ethanol, DDGs and pork. U.S. Ag Secretary Sonny Perdue suggested talks with China on removing ethanol tariffs were "positive." Weather in the U.S. will continue to challenge a normal planting pace with ongoing blizzards and heavy rain activity, and a 16- to 30-day forecast of above normal precipitation likely to stifle seeding efforts. One thing to keep in mind is that in 2018, after a delayed start, farmers were able to plant 39% of the crop in one week. Funds remain short a record amount of corn with the best estimate at 270,000 contracts, or 1.350 billion bushels. DTN's National Corn Index closed at 3.36 on Tuesday and reflects an average basis of 24 under May. Outside markets were mildly supportive with the U.S. dollar index down and crude oil continuing its upward move.

Soybeans:

Soybeans, after a mostly neutral USDA report, are still being underpinned by hopes for a beneficial China deal. The report, which cut U.S. ending stocks by a meager 5 million bushels to a still record large 895 million bushels, revealed that world-record ending stocks grew slightly, but the nearly 1 mmt increase in Brazil's soy production to 117 mmt, was not expected. The report only had those minor changes, but once again confirmed a world that is awash in soybeans. Combined South American production will be nearly 14 mmt higher this year in a year where China and the U.S. battle over trade issues and China's own demand has dropped due to African swine fever. A new daily sale was announced Wednesday of 133,800 mt (4.9 mb) sold to unknown, but U.S. demand has left much to be desired with much cheaper South American offers and ongoing talks with China keeping U.S. sales and shipments well behind a year ago. This is a market tired of the constant rumors. The latest one it is that once the new trade deal is consummated, it will include 40 mmt (1.470 bb) of annual China soy purchases from the U.S. Recent news that the dreaded African swine fever has now been found in South Africa and news on Wednesday that the U.S. pork industry has canceled its annual convention over African swine fever fears may illustrate how big an issue ASF really is. Weather in the U.S., with the major two-day storm hitting the Midwest and Plains with a vengeance is likely to lead to more flooding and delayed planting efforts, with the eye of the storm over western Nebraska into South Dakota and Minnesota. Any extended planting delay will not be good news for soybeans as it is likely to lead to an uptick in seeding. May soybeans, currently around $9.00, will continue to see support at $8.95 and growing resistance in the $9.10 to $9.15 area. DTN's National Soybean Index closed at $8.14 on Tuesday, 85 cents below the May futures contract.

Wheat:

Wheat finished a slow day mixed with Chicago and Kansas City lower and Minneapolis wheat, which has fallen hard lately, recovering to finish 7 1/2 cents higher. Tuesday's USDA report, as in corn, detailed a looser balance sheet for not only U.S. but also world wheat. A combined 31.5 million bushels of feed and export demand was slashed from U.S. demand, sending stocks close to that 1.1-bb level. Add to that the greater-than-expected increase in world wheat ending stocks by 5 mmt, and the bearish outlook for wheat was again verified. The only good news is the recent plunge in wheat has made U.S. Gulf wheat much cheaper on an FOB basis than either EU or Black Sea supplies, but U.S. exports continue to lose out. Ongoing U.S. weather, which looks to remain cool and wet, will likely aid hard red winter (HRW) conditions, while worsening soft red (SRW) wheat conditions. With the current blizzard and colder-than-normal temperatures in the Northern Plains, spring wheat planting efforts will be stymied. Chicago and Kansas City wheat futures are both below the 20-day and 50-day moving averages, while Minneapolis May could have a buy signal only confirmed with a higher Thursday close, with a bullish engulfing pattern Wednesday following Monday's "tweezer bottom." Funds maintain a fairly large Chicago net short and a record net short in Kansas City. Only a rally above the 50-day average is likely to force funds to cover. In the meantime, the bears remain in control. DTN's National HRW Index closed at $4.14 on Tuesday and that is an average basis of 13 under Kansas City May futures.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow Dana on Twitter @mantini_r

(CZ)

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