DTN Closing Grain Comments

Soybeans Recover, Wheat and Corn Take a Breather

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN illustration by Nick Scalise)

General Comments:

July corn closed up 1/4 cent per bushel and December corn was up 2 1/4 cents. July soybeans closed up 6 1/2 cents and November soybeans were up 6 3/4 cents. July KC wheat closed down 3 3/4 cents, July Chicago wheat was down 6 cents and July Minneapolis wheat was up 1/4 cent.

The June U.S. dollar index is trading down 0.021 at 97.875. The Dow Jones Industrial Average is down 78.61 points at 25,798.72. June gold is up $0.70 at $1,273.90, July silver is up $0.03 at $14.44 and July copper is down $0.0385 at $2.6765. July crude oil is down $1.69 at $61.44, June heating oil is down $0.0297, July RBOB is down $0.0291 and June natural gas is down $0.073.

Corn:

After dropping as much as 8 cents early Wednesday from Tuesday's close, following the recent 56-cent rally, corn traded both sides of unchanged in quiet trade, closing up 1/4 cent on July, while new crop December was up 2 1/4. The recent rally that began on May 13, has now resulted in eight straight higher closes. Tuesday's volatile market saw a midday rumor from Bloomberg news and various Twitter outlets regarding a second farmer aid package to be announced on Thursday, that sent both soybeans and wheat reeling. The gist of the rumored $15 billion farmer aid package included payments of $2.00 on soybeans and 63 cents on wheat, but just 4 cents to corn farmers. Weakness in those markets pulled corn down after a test of a weekly trend line near $4.00 on July, and a major sell zone near $4.15 on December corn. On Wednesday, little has changed with respect to the potential bullish supply scenario, with the lowest planting pace on corn in history at 49% done, and a forecast that promises much more rain and flood potential in the coming week. Talk is escalating about how much acreage and yield loss might be the result of late planting, with some scary estimates on both. The range of estimates of corn that might use the prevented planting option is 3 million to as much as 10 million acres. Managed money funds, who had been short a record 344,000 contracts came into Tuesday's overnight session thought to be anywhere from 140,000 to 180,000 contracts net short. Only Friday's CFTC Commitment of Traders report will give us clarity. There are still a few potential warning signs that could see corn face more of a correction, but certainly if funds choose to exit on their entire short, we will go higher. Ethanol production for last week was up nearly 2% at 1,071 million barrels per day, while inventory climbed over 5% to 2.34 million barrels. Look for a rally and a close above $4.00 on July to signal another leg higher, while support for July on a break looks to be $3.80 to $3.85. DTN National Corn Index closed at $3.68 on Tuesday, priced 26 cents below the July contract.

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Soybeans:

Soybeans on Wednesday made a nice early recovery following Tuesday's midday plunge attributed to so far unconfirmed rumors of another farmer aid package to be announced soon. The gist of the rumor was that a second payment would be made to farmers, and this time $2.00 per bushel. The market's immediate reaction was disbelief that this would be announced in the midst of planting. The soy market seems more relaxed on Wednesday and the trade will soon begin to pay more attention to lagging soy seeding and the still large net fund short, estimated to be 155,000 contracts. A solid close above the 20-day moving average ($8.36 on July, $8.59 on November) would likely lead to more buying, with strong resistance some 30 to 40 cents per bushel higher. The rumored $2.00 per bushel payment would compare to $1.65 last year, and there is no indication how they would determine eligibility. The weather outlooks remains bullish with five-day rain coverage estimated to be 70% to 80% in not only the Midwest, but also in HRW and HRS wheat areas. The good news is that the Chinese ambassador to the U.S. indicated that they are ready to resume trade talks, and Treasury Secretary Mnuchin has plans to push back the next round of tariffs. The U.S. and Japan meet on May 27 to discuss trade and Japan hopes to avoid any sort of trade war with the U.S. DTN's National Soybean Index closed at $7.40 Tuesday, priced 82 cents below the July contract.

Wheat:

Having fallen 21 cents from the highs scored on Tuesday, and some 70 to 75 cents higher than contract lows set eight days ago, both Chicago and Kansas City wheat finished lower on Wednesday, while Minneapolis eked out a 3/4 cent gain. Wheat conditions do not match the rhetoric nor the expectation for both quality and quantity declines to impact soft red winter (SRW) and hard red winter (HRW) wheat as heavy rains have already fallen and are slated to fall in some key wheat areas over the next week. Some parts of Oklahoma have received over 8 inches of rain in the last few days alone. Winter wheat conditions as of Sunday were 66% good to excellent -- the best in years, while individual states like Kansas, at 60% and Oklahoma at an amazing 88% good to excellent suggest above trend yields. However, severe weather and heavy rains ahead of harvest, just weeks away, will likely lead to some lodging, fusarium and undoubtedly lower protein. In spring wheat country, planting reached a better than expected 70%, trailing the average of 80%. However, the five-day forecast is for 80% coverage with some heavy rains, keeping planters idled. The wheat markets feel like they could correct more to the downside short term. DTN's National HRW index closed at $4.21 Tuesday, 15 cents under the July contract and up from its lowest prices in over a year.

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

Follow him on Twitter @mantini_r

(CZ)

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Dana Mantini