DTN Before The Bell Grains

Morning CME Globex Update:

After trade talks broke apart on Friday and USDA filled its May WASDE report with bearish grain estimates, Monday's crop prices are lower, having a difficult time finding support. Dow Jones futures are down 500 points after China retaliated with $60 billion of tariffs against U.S. goods.

Other Markets:

Dow Jones:	Lower
U.S. Dollar Index:	Lower
Gold:	Higher
Crude Oil:	Higher

Corn:

July corn is down 7 cents early Monday after CNBC.com reported China is retaliating against Friday's increased tariffs with $60 billion of their own tariffs against U.S. goods. The latest forecast is anticipating five days of mostly drier weather in the Corn Belt before more rain returns to the northern Midwest and southwestern U.S. Plains in days six and seven. There were some scattered showers over the weekend in the central and eastern Corn Belt, prolonging the time fields need to dry, especially in the eastern Corn Belt. Even though China is not a major buyer of U.S. corn, U.S. trade policy remains a large bearish concern in U.S. grain markets. The U.S. is also in the thick of talks with Japan and it is not clear if or when the new agreements with Mexico and Canada may be approved. Friday's new estimate that U.S. ending stocks will reach 2.485 billion bushels (bb) in 2019-20 based on a 15.0 bb crop seems high this early in the season while corn planting is undetermined. It is possible however, that a smaller crop and less demand could reach the same result. Fundamentally, the price outlook for corn remains roughly neutral with the past three years and planting uncertainty remains a risk to short positions. Technically, cash corn prices are holding in a sideways trading range. DTN's National Corn Index closed at $3.27 Friday, priced 25 cents below the July contract. In outside markets, Dow Jones futures are down 500 points, falling further after news hit that China is retaliating with their own higher tariffs on U.S. goods.

Soybeans:

July soybeans are down 15 cents early, hurt by news of the increased trade war. There is an opportunity for planting progress the next five days in the drier areas of the Midwest. Judging from media reports, the U.S. and China remain far apart in terms of trade and after four and a half months of being told that an agreement was close, the bullish side of the soybean market finally gave up and let prices fall to new lows. Adding to bearish concerns, USDA reduced its export estimate by 100 million bushels (mb) Friday, sending its estimate of U.S. ending soybean stocks to 995 mb for 2018-19, a new record high. The adjustment reflects the slow export pace that we have seen for months and an acknowledgement that China is not likely to jump in and rescue U.S. soybean demand this season. On that point, the White House is now said to be considering another round of farm aid to help compensate for the lack of trade. At the moment, it is difficult to imagine how or when the rift between the two countries might be mended, making it difficult to have much hope for increased soybean demand ahead. Technically, both cash and future soybean prices are trending lower. DTN's National Soybean Index closed at $7.25 Friday, still trending lower and priced 84 cents below the July contract.

Wheat:

July K.C. wheat is trading down 3 cents early, dipping even below its 2016 low of $3.85 as wheat prices remain under persistent pressure with potential bulls finding no hope on the horizon yet to get back in the game. On Friday, USDA estimated 1.127 bb of U.S. ending wheat stocks that will be carried into the new season on June 1. Expecting only 2.023 bb of demand for U.S. wheat in 2019-20, the 1.9 bb of production that is USDA says is on the way in 2019 will be more than enough to keep supplies abundant and near 1 billion bushels for a fifth consecutive season. Perhaps the most difficult part for wheat bulls to accept is that USDA is expecting a 6% increase in world wheat production in 2019, a bearish force that is difficult to argue with while the world's major wheat regions are currently reporting favorable weather conditions. Monday's Crop Progress report is likely to show another week of high good-to-excellent crop ratings for winter wheat with problem areas in the eastern Midwest. For now, the trends in all three U.S. wheat prices are down, but also near multi-year lows where support is typically found. DTN's National HRW index closed at $3.87 Friday, 15 cents under the July contract and at its lowest prices in over a year. DTN's National SRW index closed at $3.97, also at its lowest prices in over a year. May grain futures contracts expire on Tuesday, May 14.

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

FollowTodd on Twitter @ToddHultman1

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