DTN Before The Bell Grain Comments

Row Crops Start Quietly Lower

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

Morning CME Globex Update:

July corn and soybeans were a little lower early Wednesday, pressured by good planting weather and ongoing concerns about this year's lack of soybean demand. July Kansas City wheat was down 5 1/4 cents, still lacking support after achieving a new nine-month high last week.

Other Markets:

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

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Corn:

July corn was down a half-cent early Wednesday, staying near its highest prices in eight months with ongoing support from a stretch of dry weather in Brazil that is threatening to bring down corn yields. There is a chance of light to moderate showers in south-central Brazil in the week ahead, but Mato Grosso is expected to stay dry. Here in the U.S., rain is falling around Wisconsin, but the weather remains favorable for planting corn. Northern states will see episodes of light to moderate rains the next seven days and a return of cooler temperatures from Thursday to Saturday. The southwestern Plains will experience hot temperatures in the 90s and 100s, which will be stressful for southern corn. Technically, the trends remains up in both July and new-crop corn. CME Group reported 124 delivery intentions in May corn early Wednesday. DTN's National Corn Index closed at $3.68 Tuesday, still near its highest price in 22 months and priced 35 cents below the July contract. In outside markets, the June crude oil is up $1.66, pushing new three-year highs after President Trump withdrew from the Iranian nuclear deal on Tuesday. The U.S. Labor Department said producer prices were up 2.6% in April from a year ago, slightly less than expected. The June U.S. dollar index is down 0.14.

Soybeans:

July soybeans were down 2 cents early Wednesday, still lower on the month after last week's meeting in Beijing ended without any encouragement that China would withdraw its proposal of a 25% tariff on U.S. soybeans. Meanwhile, Dow Jones' pre-report survey expects a slight reduction in USDA's estimate of ending soybean stocks in Thursday's WASDE report. However, that is difficult to believe as U.S. soybean shipments are down 13% from a year ago, pointing to higher ending stocks, especially while China benefits from Brazil's record harvest. Planting weather has improved greatly from April's conditions and eased concerns of corn acres switching to soybeans. With the current season heading toward 550 million bushels (mb) of ending soybean stocks and possibly more without help from China's demand, old-crop soybean prices remain under bearish pressure. Technically, the trend is down in July soybeans, but still sideways in November soybeans. For May contracts, the CME Group reported 68 delivery intentions for soybeans, but none for meal and soybean oil early Wednesday. DTN's National Soybean Index closed at $9.49 Tuesday, up from its lowest price in over two months and priced 71 cents below the July contract.

Wheat:

July Chicago wheat was down 5 1/2 cents and July K.C. wheat was down 5 1/4 cents early, still running away from last week's new nine-month highs as traders have to be concerned that this could be another one of those years when U.S. wheat production is down, but the rest of the world does well. A Dow Jones survey forecasts 1.18 billion bushels (bb) of winter wheat production in 2018-19, down from 1.27 bb the previous year. That doesn't seem like much of a drop, giving the severity of this year's drought in the southwestern Plains, but it is difficult to nitpick when the International Grains Council is estimating the 2018 world wheat crop at over 27 bb. Fundamentally, it is difficult for wheat prices to trade higher while most of the world's wheat regions appear to be off to a good start in 2018. Technically, the trends turned higher last week for the July contracts of both, Chicago and K.C. wheat. There were no deliveries for May wheat contracts early Wednesday. DTN's National SRW index closed at $4.82 Tuesday, down from its highest price in nine months and 32 cents below the July contract.

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

FollowTodd on Twitter @ToddHultman1

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Todd Hultman