DTN Early Word Grains
U.S. President Says More Tariffs, Market Says Risk-Off
July corn was down 7 cents, July soybeans were down 20 1/2 cents, and July Kansas City (HRW) wheat was down 9 3/4 cents.
CME Globex Recap:Late Monday, CNN.com reported President Trump directed another $200 billion of tariffs to be levied against China, if China goes through with it's retaliation, planned for July 6. The news put investors in a defensive mode. Global stock markets and most commodities are trading lower as are U.S. soybean prices, one of China's intended targets.
OUTSIDE MARKETS:Monday's trading saw the Dow Jones Industrial Average drop 103.01 points to 24,987.47 while the S&P 500 was down 5.91 points to 2,773.75, while the 10-year Treasury yield ended at 2.93%. Early Tuesday, DJIA futures were down 327 points. Asian markets were lower with Japan's Nikkei 225 down 401.85 points -1.8%) and China's Shanghai Composite down 114.08 (-3.8%). European markets were also lower with London's FTSE 100 down 35.43 points (-0.5%), Germany's DAX down 172.71 points (-1.3%), and France's CAC 40 down 60.58 points (-1.1%). The euro was down 0.0067 and the U.S. dollar index was up 0.42 to 95.18. June 30-year T-Bonds were up one full point while August gold was up $1.50 to $1,281.60 and August crude oil was down $0.88 at $64.81. Soybeans on China's Dalian Exchange were higher and Malaysian palm oil futures were down 1.9%.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
| BULL | BEAR | ||
| 1) | USDA's lower estimate of world ending corn stocks estimate looks reasonable, but has not stopped corn's downward slide | 1) | Friday's noncommercial net longs were still the most since June, 2016 -- far too high for this market. |
| 2) | Bullish arguments for soybeans have come down to hoping for a hot and dry U.S. summer. | 2) | President Trump's move toward another $200 billion of tariffs against China has investors covering bets around the globe -- a risk-off response. |
| 3) | The forecast for southern Russia is still mostly dry, but may not be enough to support wheat prices. | 3) | Winter wheat harvest is ahead of schedule and spring wheat crop ratings are their highest since 2010. |
CORN July corn is down 7 1/4 cents, at new contract lows early Tuesday as politics inserts greater influence into the bear trend of 2018. Late Monday, CNN.com and others reported President Trump is planning to move forward with another $200 billion of tariffs against China, if China proceeds with its plans to retaliate on July 6 with $34 billion of its own tariffs. This time, not only are soybeans trading lower, but so are stock markets around the world and most commodities. Here at home, Dow Jones futures are down 1.3%. With politics now such a disrupting influence in grain markets, it may not make much sense to talk about the economics of grain prices, but we will keep in mind that USDA is expecting a significant drop in world ending corn stocks in 2018-19 while U.S. crop conditions are doing well. Late Monday, USDA said 78% of corn was rated good-to-excellent, resulting in the highest DTN Corn Condition Index since 1994. Technically, July corn is trading near the 2018 spot low of $3.45 1/2, getting closer to the 2017 low of $3.28 1/2.
SOYBEANS July soybeans are down 21 1/2 cents, caught in a downward spiral of bearish trade war politics, which has led China to move to a 25% tariff on U.S. soybean imports and pinched U.S. demand at a time when newly planted crops here in the U.S. are looking good. One of the dangers of the current market situation is that political decisions can change on a dime, especially as global stock markets start showing negative impact. Another is that without the buy side of the market involved, soybean prices can start to disconnect from economic expectations and become subject to wide, volatile swings in either direction. For now, the direction is clearly down while U.S. trade relations with the world's largest buyer of soybeans are turning more hostile. Late Monday, USDA said 73% of U.S. soybean crops were rated good to excellent, in favorable shape overall. For now, the trend is clearly down with July soybeans trading at its lowest spot prices in over two years. November soybeans are near their 2017 low of $9.07.
WHEAT July K.C. wheat is down 9 3/4 cents early at their lowest prices in two months, also caught in the net of Tuesday morning's bearish mood. Wheat prices may not be directly impacted by the trade dispute with China, but they also do not like how the U.S. dollar has been rising the past two months while wheat crops around the world seem to be doing pretty well, overall. Late Monday, USDA said 27% of U.S. winter wheat was harvested and 78% of spring wheat was rated good to excellent, giving DTN's Spring Wheat Condition Index its highest score since 2010. Early July is the typical time for seasonal highs in wheat prices and it looks like the seasonal downturn has already begun. The trends for all three wheats are now down.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.26 | -$0.05 | -$0.30 | Jul | $0.006 |
| Soybeans: | $8.46 | $0.03 | -$0.63 | Jul | $0.000 |
| SRW Wheat: | $4.68 | -$0.09 | -$0.22 | Jul | $0.006 |
| HRW Wheat: | $4.92 | -$0.18 | -$0.07 | Jul | $0.027 |
| HRS Wheat: | $5.49 | -$0.07 | -$0.14 | Jul | $0.004 |
Todd Hultman can be reached at todd.hultman@dtn.com
Todd can be followed throughout the day on Twitter @ToddHultman1
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