DTN Before The Bell Grain Comments

Grains Lower After More Tariffs Proposed

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

May contracts of corn, soybeans, and all three wheats were starting lower Friday after President Trump proposed another $100 billion of tariffs against China. At 8 a.m. CDT, USDA announced 4.8 million bushels (130,632) of U.S. soybeans sold to Mexico, half of which was for 2017-18, and half for 2018-19. 16.8 million bushels (458,000 mt) were sold to unknown destinations, 12.0 million bushels (327,000 mt) of which were for 2017-18. 3.9 million bushels (100,000 mt) of U.S. corn were sold to Egypt for 2017-18. 20,000 mt of soybean oil were also sold to unknown for 2017-18.

Other Markets:

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

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Corn:

At 8 a.m. CDT, USDA announced 3.9 million bushels (100,000 mt) of U.S. corn were sold to Egypt for 2017-18. May corn dropped 2 3/4 cents earlier Friday after President Trump proposed an additional $100 billion of tariffs against China. AP News reported early Friday that China is not backing down and is prepared to "fight back firmly," an expected response that has U.S. stock futures and most commodities trading lower. The U.S. does not export a significant amount of either corn or wheat to China, but Friday's news still has a depressing effect on a broad range of ag prices. Here in the U.S., cold temperatures continue to dominate the northern Corn Belt and keep planters out of fields while the 8 to 14 day outlook shows more cold and wet weather ahead. Tuesday's WASDE report may bring a higher estimate of U.S. ending corn stocks after Mar. 1 corn stocks were found to be a record high 8.89 billion bushels. Technically, the trend in May corn is sideways and the trend in December corn is up. DTN's National Corn Index closed at $3.55 Thursday, 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 0.04 and the Dow Jones Industrial Average is down 188 points after the U.S. Labor Department said non-farm payrolls were up 103,000 in March, more than expected. U.S. unemployment held steady in March, at 4.1%.

Soybeans:

At 8 a.m. CDT, USDA announced 4.8 million bushels (130,632) of U.S. soybeans sold to Mexico, half of which was for 2017-18, and half for 2018-19. 16.8 million bushels (458,000 mt) were sold to unknown destinations, 12.0 million bushels (327,000 mt) of which were for 2017-18. 20,000 mt of soybean oil were also sold to unknown for 2017-18. Earlier, May soybeans were down 12 1/4 cents, once again taking the brunt of selling while President Trump continues to unilaterally protest China's treatment of intellectual property rights with increased tariffs. While this is obviously not a favorable market environment for soybean prices and the dispute may go on for years, so far the bearish response in soybean prices has been limited by the fact that China still needs a lot of soybeans and will become vulnerable to problems when Brazil's exportable supplies run low, typically in the fall. The anticipation of that situation is already showing up in Brazil's FOB soybean price, trading at $11.27, which is near the highest level since January and 36 cents above the FOB soybean price in New Orleans. Fundamentally, soybeans have plenty of bearish risks, including the current trade war with China, but weather is still likely to be the determining factor for prices in 2018 as it will define China's options. Technically, the trend in May soybeans is sideways, but close to turning lower. The trend in November soybeans remains up if prices can hold above $10.07. DTN's National Soybean Index closed at $9.58 Thursday, up from its lowest prices in over a month and priced 73 cents below the May contract.

Wheat:

May Chicago wheat was down 2 cents and May K.C. wheat was down 3 3/4 cents, getting a little bearish influence from Friday's tariff news, but is largely immune to export worries, especially to China. Winter wheat is more concerned about weather, which has been mostly hostile in 2018. Friday's seven-day forecast remains mostly dry for the western U.S. Plains with snow and cold temperatures blocking spring wheat planting efforts in the northwestern Plains. The SRW wheat crop in the eastern Midwest will have a drier week, which should be favorable for crops while temperatures remain cold for early April. Outside of the U.S., much of the winter wheat has not emerged and no serious problems are being reported yet, although dry weather may be an early concern in parts of China. Fundamentally, burdensome supplies of old-crop U.S. wheat remain a bearish weight while exports are a difficult sale. Technically, the trends for all three wheats remain down. DTN's National SRW index closed at $4.33 Thursday, up from 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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Todd Hultman