DTN Closing Grain Comments

Tweets Inspire Broad Commodity Sell-Off

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

General Comments:

July corn closed down 6 1/2 cents per bushel and December corn was down 5 1/2 cents. July soybeans closed down 12 cents and November soybeans were down 11 1/4 cents. July KC wheat closed up 1 1/2 cents, July Chicago wheat was down 3/4 cent and July Minneapolis wheat was steady. The June U.S. dollar index is trading down 0.005 at 97.255. The Dow Jones Industrial Average is down 172.57 points at 26,332.38. June gold is up $1.80 at $1,283.10, July silver is down $0.05 at $14.93 and July copper is up $0.0220 at $2.8410. June crude oil is up $0.36 at $62.30, June heating oil is down $0.0027, June RBOB is down $0.0310 and June natural gas is down $0.041.

Corn:

Sunday tweets from President Donald Trump, threatening to hit Chinese goods with new tariffs, rocked the prices of several ag products Monday. Corn joined soybeans, hogs, cotton and natural gas in showing some of the largest percentage losses on Monday's commodity board. At one point, July corn was down over 15 cents, but found enough composure to finish down 6 1/2 cents by the end of the day, settling at $3.64 1/4. Aside from the tariff threat, Monday afternoon's Crop Progress report is expected to show corn planting progress somewhere near 25% complete, which if true is still not hopeless, provided weather cooperates in time. The 7-day forecast however, expects moderate-to-heavy rains over most of the Corn Belt, adding to planting difficulties. Flooding remains a problem along the Mississippi River and a flash flood watch is in effect for much of Kansas and Missouri. The extended forecast looks drier, giving some hope for planting progress later this month. At this point, there is still a legitimate risk of losing corn acres and possibly yield due to adverse planting conditions in early 2019. Earlier Monday, USDA said 38.5 million bushels (mb) of corn were inspected for export last week, less than the 51.0 mb needed to reach USDA's export target for 2018-19. Brazil's private consultant, Safras & Mercado, estimated Brazil's corn crop at 101.8 mmt (4.01 bb), a new record high, if true. Fundamentally, the outlook for cash corn prices remains neutral if planting goes well. If significant problems do develop, cash corn prices could trade in the high $$3s, near their highs of the past four years. Technically, cash corn is near the middle of its 2019 trading range and the weekly stochastic has turned up. There were 590 deliveries of May corn late Friday. DTN's National Corn Index closed at $3.45 Friday, priced 26 cents below the July contract and back in its narrow, sideways range. In outside markets, U.S. stock indices and a large majority of commodities are trading lower after Sunday's presidential tweets threatened higher tariffs.

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Soybeans:

July soybeans were down over 25 cents shortly after the 8:30 open Monday morning, but climbed back to a 12-cent loss by the close, ending at $8.30 1/4. Considering how important a trade deal with China is to U.S. soybean demand, Monday's loss was not as large as it could have been. Of course, soybean prices have been falling since mid-April and Monday's close put prices near the 2018 low of $8.26 for the July contract. China's Vice Premier Liu He is still expected to lead a trade delegation to Washington D.C. this week, but it is not certain yet what impact Sunday's tweets may have on the trip or the state of trade talks when they arrive. In the midst of all the uncertainty soybean prices are facing, the reasonably known factors of mounting record U.S. soybean supplies lean heavily bearish. The possibility of another large U.S. soybean crop in 2019 plus no trade deal with China is U.S. producers' worst nightmare and will challenge the bearish limits of soybean prices -- if the nightmare turns out to be true. Earlier Monday, USDA said 22.1 mb of soybeans were inspected for export last week, below the 38.5 mb needed each week to reach USDA's export goal. Technically, in this heavily bearish environment, noncommercials remain comfortably net short a record high 118,335 contracts and the trend is clearly down. May deliveries on late Friday totaled 876 for soybeans, 284 for meal and 671 for soybean oil. DTN's National Soybean Index closed at $7.56 Friday, 86 cents below the July contract and near its lowest price in six months.

Wheat:

July KC wheat ended up 1 1/2 cents at $4.03 Monday, a small but bold expression of bullishness on a day when most of the commodity board was colored red. Monday's hazard map from the National Weather Service showed the eastern two-thirds of Kansas and central Missouri in a flash flood watch, but we can't say that is much of a bullish threat, given all of wheat's other, more bearish factors. Monday's Crop Progress report may show an increase in poor-to-very poor ratings for winter wheat in the eastern Midwest, but again, wheat in the southwestern U.S. Plains and Pacific Northwest is probably still carrying high good-to-excellent ratings. The pace of spring wheat planting will be of interest Monday afternoon as conditions have not been favorable in the Dakotas and Minnesota. Technically, spot KC wheat is near its lowest prices in 13 years, a historically cheap price that is finding no significant bullish argument yet. Late Friday, May deliveries totaled 30 for Chicago wheat and none again for KC wheat. Trading has become dangerously thin for May wheat contracts with expiration set for May 14. DTN's National HRW index closed at $3.86 Friday, up from its lowest close in over a year and 15 cents below the July contract. DTN's National SRW index closed at $4.10, trading up from its March low.

Todd Hultmancan be reached at todd.hultman@dtn.com

FollowTodd on Twitter @ToddHultman1

(CZ)

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Todd Hultman