DTN Early Word Grains

Markets Start Out Quiet Early Thursday

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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6:00 a.m. CME Globex:

July corn is down 1 1/2 cents, July soybeans are up 3 cents and July KC wheat is down 1/2 cent. .

CME Globex Recap:

Prices are quiet overnight with outside commodities leaning higher early Thursday. Trade uncertainty with major ag markets remains a bearish concern for grain prices while the U.S. dollar index is trading at its highest prices in nearly two years.

OUTSIDE MARKETS:

Previous closes on Wednesday showed the Dow Jones Industrial Average down 59.34 at 26,597.05 and the S&P 500 down 6.43 at 2,927.25, while the 10-yr Treasury yield ended at 2.52%. Early Thursday, DJIA futures are down 17 points. Asian markets are mixed with Japan's Nikkei 225 up 107.58 (0.5%) and China's Shanghai Composite down 77.79 points (-2.4%). European markets are lower with London's FTSE 100 down 31.89 points (-0.4%), Germany's DAX down 12.74 points (-0.10%), and France's CAC 40 down 11.55 points (-0.2%). The June euro is unchanged at $1.119 and the June U.S. dollar index is up 0.040 at 97.895. The June 30-year T-Bond is down 4/32nds, while June gold is up $0.20 at $1,279.60 and June crude oil is up $0.20 at $66.10. Soybeans and meal on China's Dalian Exchange were both slightly lower.

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BULL BEAR
1)

Corn and spring wheat planting remain behind schedule, a potential problem.

1)

The market is anticipating record ending U.S. soybean stocks.

2)

Managed futures funds were net short a total of 475,045 contracts of corn, soybeans and Kansas City wheat as of April 16, the largest obligation on record.

2)

The U.S. will likely carry 1.10 billion bushels of old-crop wheat into 2019-20.

3)

Commercials on the other hand, are net long the same three crops and the national average corn basis is within a couple cents of its narrowest level in over a decade.

3)

The U.S. is threatening China with sanctions related to buying oil from Iran while trying to reach a trade agreement. Trade status with major ag markets remains uncertain.

MORE COMMODITY-SPECIFIC COMMENTS

CORN July corn is down 1 1/2 cents early Thursday, still showing no rebound after cash prices were dragged down to their lowest close in over four months on Wednesday. Record noncommercial selling continues to weigh on prices and is winning the short-term tug of war, while commercial net longs indicate that corn has attractive value at these lower prices. Thursday morning's weather map shows rain in southern Minnesota where conditions are already wet and scattered showers along the lower Mississippi and Ohio rivers. The seven-day forecast has heavy rain slated for the central and southwestern Corn Belt, adding to early concerns about slow planting. There is a temptation to think weather doesn't matter when prices are falling, but rarely do noncommercials have the final say in determining prices. U.S. corn shipments have shown more activity lately and Thursday morning's Export Sales report will get attention. The national average corn basis is 20 cents under the May contract, within a couple cents of its narrowest level in a decade.

SOYBEANS July soybeans are up 3 cents early Thursday, a small reaction after falling to their lowest level in seven months this week. Trade concerns, not only with China, but with other key U.S. ag markets remain a concern for all ag products, especially soybeans. U.S. soybean shipments have dropped off lately and another bearish shipment pace is likely to show up in Thursday morning's Export Sales report. USDA is already anticipating a record high 895 million bushels of ending soybean stocks in 2018-19 and if the U.S. doesn't come up with a trade agreement with China, including additional near-term purchases, ending supplies are at risk of going even higher. The one bullish factor that has been consistent for soybeans is that commercials continue to show an interest for these lower prices, staying net long on the futures board.

WHEATJuly KC wheat is down 1/2 cent early, close to its 2017 low and what has been long-term support at $4.00 a bushel. The HRW wheat crop has received some beneficial rain this week and there are early morning showers in central Nebraska and eastern Oklahoma. Noncommercial selling has been the dominant influence of wheat prices since early February, and so far, there is not much happening to challenge their influence. USDA's good-to-excellent crop ratings for winter wheat are at their highest level in seven years in spite of concerns of excess moisture in the eastern Midwest. And if wheat is waiting for a weather problem outside of North America to emerge, there has been nothing significant to point to yet. The year is still young, but so far, the fundamental outlook for U.S. wheat prices is to stay at cheap levels in 2019.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.27 -$0.04 -$0.20 May $0.002
Soybeans: $7.75 -$0.06 -$0.80 May $0.006
SRW Wheat: $4.09 -$0.06 -$0.23 May $0.006
HRW Wheat: $3.93 -$0.10 -$0.12 May $0.002
HRS Wheat: $4.70 -$0.07 -$0.34 May $0.009

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

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Todd Hultman