DTN Before The Bell Grain Comments

Soybeans Cautiously Lower as China Meeting Approaches

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

Morning CME Globex Update:

July soybeans were down 5 1/2 cents early Wednesday as traders continue to show caution ahead of Thursday's U.S. meeting with China to discuss trade. July corn and K.C. wheat were both down a quarter-cent after day one of the HRW wheat tour found crop conditions as bad as advertised.

Other Markets:

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

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Corn:

July corn was down a quarter-cent early Wednesday, still near its new eight-month high after a quiet overnight session. The central Midwest is expecting rain from Kansas and Missouri to Michigan the next two days which will interrupt row crop planting efforts, but not for long as warm temperatures and drier conditions are expected after Thursday. Brazil's second corn crop is not doing as well, finding dry weather at pollination time and a seven-day forecast that offers no help. On the demand side, FOB corn prices for both, Brazil and New Orleans are trending higher, but Brazil's price is 21 cents cheaper early Wednesday. Technically, Tuesday's higher close turned the trend up in July corn, in line with what it already was in new-crop corn. CME Group reported 569 delivery intentions in May corn early Wednesday. DTN's National Corn Index closed at $3.68 Tuesday, its highest price in 22 months and priced 38 cents below the July contract. In outside markets, the June U.S. dollar index is down 0.08 after payroll firm ADP reported 204,000 new private sector jobs in April, slightly more than expected reported RTTNews.com. The Federal Reserve will conclude its two-day meeting later Wednesday and is not expected to change the federal funds rate.

Soybeans:

July soybeans were down 5 1/2 cents early, but staying true to its sideways range as U.S. officials prepare to discuss trade issues with their Chinese counterparts on Thursday. July soybean meal is starting $2.50 lower after hitting a new contract high on Tuesday. This week's storms expected in the central Midwest are not serious concerns for row crops as warmer and drier weather is expected to follow Thursday. In Brazil, the soybean harvest is nearly over, but we find Brazil's FOB price near its highest level in twenty months -- not what we would normally expect to see after a record harvest. Brazil's high price is an indicator of how strong China's demand for Brazil's soybeans has been, while encountering trade problems with the U.S. It is difficult to say how Thursday's talks with China will go, but any easing of tariff concerns, if it were to happen, would likely have a bullish impact on U.S. soybean prices. For now, the trend is sideways in old-crop soybeans and up in new-crop soybeans with prices reluctant to make new highs. For May contracts, the CME Group reported 146 delivery intentions for soybeans, 70 for meal, and 17 for soybean oil early Wednesday. DTN's National Soybean Index closed at $9.78 Tuesday, down from its highest price in over a year and priced 75 cents below the July contract.

Wheat:

July Chicago wheat was down 2 cents early Wednesday, still showing no delivery intentions in the May contract. July K.C. wheat was down 1/4 cent after day one of the Wheat Quality Council's HRW wheat tour confirmed what many had anticipated -- drought-stricken winter wheat crops that also showed signs of freeze damage and wheat streak mosaic disease. The tour estimated day one yields at 38.2 bushels an acre, down from 43.0 bushels a year ago and is a number some scouts admitted may be too high. This news comes as no surprise to markets, but what has been a surprise is the sudden interest among commercials in buying Chicago wheat. DTN's ProphetX shows 559 contracts of May Chicago wheat remaining and no deliveries yet intended. The buying scramble suggests SRW wheat supplies may not be as available as once believed. Earlier in April, commercials showed no interest in buying May Chicago wheat, yet Tuesday's close found May Chicago wheat at a new nine-month high. Technically, Tuesday's higher closes turned the trends higher for the July contracts of both, Chicago and K.C. wheat. For May contracts, the CME Group reported 256 delivery intentions for K.C. wheat, but still none for Chicago wheat. MGEX had no delivery intentions for Minneapolis wheat early Wednesday. DTN's National SRW index closed at $4.93 Tuesday, its highest price in nine months and 36 cents below the July contract.

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

FollowTodd on Twitter @ToddHultman1

(KR)

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Todd Hultman