DTN Early Word Grains

Grains Under Pressure, Trade Hostilities Increase

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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6:00 a.m. CME Globex:

December corn was down 3 1/2 cents, November soybeans were down 11 1/2 cents, and September Kansas City (HRW) wheat was down 10 3/4 cents.

CME Globex Recap:

Global stock markets are lower overnight after President Trump threatened U.S. trade partners with retaliation if they don't remove tariffs and trade barriers. The Wall Street Journal reported President Trump is also planning to restrict Chinese companies from investing in the U.S.
August crude oil is a slightly lower after non-OPEC producers also agreed to increase oil production on Saturday, but again, OPEC's statement avoided committing to a specific amount. Dow Jones reported the People's Bank of China is cutting the reserve requirement for banks by 0.5% in an effort to protect the economy from increased trade war pressures.

OUTSIDE MARKETS:

Friday's trading saw the Dow Jones Industrial Average gain 119.19 points to 24,580.89 while the S&P 500 was up 5.12 points to 2,754.88 and the 10-year Treasury yield ended at 2.90%. Early Monday, DJIA futures were down 209 points. Asian markets were lower with Japan's Nikkei 225 down 178.68 points (-0.8%) and China's Shanghai Composite down 30.42 (-1.0%). European markets were also lower with London's FTSE 100 down 69.41 points (-0.9%), Germany's DAX down 160.04 points (-1.3%), and France's CAC 40 down 45.98 points (-0.9%). The euro was down 0.0016 and the U.S. dollar index was up 0.06 to 94.58. September 30-year T-Bonds were up 9/32nds while August gold was up $0.50 at $1,271.20 and August crude oil was down $0.06 at $68.52. Soybeans on China's Dalian Exchange were steady to higher and Malaysian palm oil futures were up 0.2%.

BULL BEAR
1) December corn continues to trade above last Tuesday's low, supported by USDA's lower estimate of world ending corn stocks. 1) Flooding reports aside, U.S. weather remains mostly favorable for row crops and spring wheat.
2) Even if the odds seem slim, there is a chance for adverse weather later this summer. 2) The growing trade war between the U.S. and the rest of the world is keeping investors cautious and remains a bearish weight on soybean prices.
3) So far, September contracts of Chicago and K.C. wheat are both holding above their three-month lows. 3) The trends remain lower for all three wheats, in line with their typical seasonal patterns.

MORE COMMODITY-SPECIFIC COMMENTS

CORN December corn is down 3 1/2 cents early Monday as traders in the grain sector in general are responding negatively to news that the U.S. is threatening trade partners with increased retaliation if they don't remove trade barriers. The Wall Street Journal also reported the Trump administration is planning to restrict Chinese companies from investing in the U.S. Monday morning's weather map shows rain from Nebraska to Oklahoma while last week's areas of flooding were drier over the weekend. The latest seven-day forecast is mostly favorable for summer crops with a broad coverage of rain over the northwestern Plains and across the Corn Belt. Technically, the trend in corn is still down with crop conditions seen as generally favorable.

SOYBEANS November soybeans are down 11 1/2 cents early Monday, hit by Sunday's news from the Wall Street Journal that President Trump is putting more pressure on China, planning to restrict their ability to invest in the U.S. Responding to increased pressure from the U.S., Dow Jones reported the People's Bank of China will cut the reserve requirement for banks by 0.5% on July 5. Meanwhile, closer to home, the latest seven-day forecast looks mostly favorable for row crops with moderate to locally heavy rain expected across the Midwest. Some areas will continue to struggle after last week's flooding and a flash flood watch is in effect around northeastern Nebraska and northwestern Iowa. With strained relations between the U.S. and China, it is difficult to convince potential buyers to return to the soybean market and that is keeping prices under pressure. The trend in soybeans is clearly down with plenty of uncertainty this summer, both political and weather-related.

WHEAT September K.C. wheat is down 10 3/4 cents early Monday, threatening to break below the support of its three-month low while world wheat production is expected to stay high in 2018. News that President Trump is threatening U.S. trade partners with more retaliation is also not good news for those hoping the U.S. can find a way to export more wheat. To be fair, those hopes are slim, even without political hurdles. Kansas received rain over the weekend, which is still on Monday's weather map so harvest activity was limited. The latest seven-day forecast expects generous rain amounts in the northwestern Plains, reaching into the Canadian Prairies which will favor spring wheat development. The SRW wheat crop is also expecting more rain, adding to quality concerns at harvest time. The trends in all three wheats remain down, coinciding with a seasonal influence that turns down after early July.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.29 $0.01 -$0.28 Jul $0.004
Soybeans: $8.33 $0.14 -$0.61 Jul $0.001
SRW Wheat: $4.70 -$0.03 -$0.21 Jul $0.007
HRW Wheat: $4.85 -$0.04 -$0.04 Jul $0.005
HRS Wheat: $5.35 -$0.03 -$0.14 Jul $0.007

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

Todd can be followed throughout the day on Twitter @ToddHultman1

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Todd Hultman