DTN Before The Bell Grain Comments

Morning CME Globex Update:

One day after row crop prices fell sharply in response to new tariff proposals from the U.S. and China, grains were starting modestly higher with U.S. officials expressing hope that differences can be negotiated.

Other Markets:

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

Corn:

May corn was up 2 3/4 cents early, situated in the middle of March's trading range after being hit with Wednesday's news that China's proposed tariffs were being extended to the big three grains. Tariffs on U.S. corn and wheat don't mean much as China is not a significant importer of either, but soybeans do matter to both countries and China will have a difficult time supplying its needs this fall without easy access to the U.S. U.S. officials pointed out late Wednesday that the proposed tariffs may not be enacted for several months and there is still time for negotiation to settle differences. Early Thursday, USDA said last week's export sales and shipments of corn totaled 35.4 and 49.8 million bushels respectively, a neutral-to-bearish showing for the week. Total corn shipments in 2017-18 stayed down 25% from a year ago. The political tug of war going on between the U.S. and China is apt to make trading in grains more sporadic than usual this year, but fundamentally, old crop corn prices have a bearish outlook while new crop prices are neutral. Technically, the trend is sideways in May corn and is up in December corn. DTN's National Corn Index closed at $3.46 Wednesday, down from its highest prices since June 2016 and priced 35 cents below the May contract. In outside markets, the June U.S. dollar index is up 0.25, near the upper end of its sideways range with Dow Jones futures up 102 points early.

Soybeans:

May soybeans were up 6 1/2 cents early Thursday, trying to regain composure after China proposed a tariff on U.S. soybeans Wednesday. Wednesday's initial shock seems to have worn off and attention has turned to more practical matters of when the tariffs might actually be enacted and whether or not negotiations have a chance before any new tariffs take effect. We also pointed out in DTN's article Mar. 27th article, "For Soybeans, Timing Is Everything," that Brazil's soybean exports are apt to run low this fall and China will then be more dependent on the U.S. for its supplies. Until then however, U.S. soybean exports have struggled in 2017-18 and Thursday's weekly report showed 41.6 million bushels of sales and 21.3 million bushels of soybean shipments, another bearish combination for the week that still has total shipments down 12% in 2017-18 from a year ago. Given the political environment, soybeans are vulnerable to more volatile trading in 2018, but for now, the trend in May soybeans is sideways and the trend in November soybeans remains up. DTN's National Soybean Index closed at $9.41 Wednesday, down from its highest prices in a year and priced 74 cents below the May contract.

Wheat:

May Chicago wheat was up 4 3/4 cents and May K.C. wheat was up 6 cents early Thursday, two prices that showed little reaction to Wednesday's news and sharp drops in row crop prices. As mentioned above, China's wheat imports are not significant and especially in early 2018 when the world has so much wheat that the U.S. has been unable to generate any significant export business anyway. Early Thursday, USDA said last week's export sales and shipments of wheat totaled 4.0 and 15.7 million bushels respectively, another bearish week that has total wheat shipments down 9% in 2017-18 with two months remaining. Thursday's seven-day forecast remains mostly dry for the western U.S. Plains while the new U.S. Drought Monitor showed slight moisture improvement in the Dakotas, central Texas, and parts of Missouri. In spite of this week's modest rebound in winter wheat prices, the trends remain down for all three wheats. DTN's National SRW index closed at $4.24 Wednesday, near its lowest close in over a month and 32 cents below the May contract.

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

FollowTodd on Twitter @ToddHultman1

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