DTN Early Word Grains

Commodities Broadly Mixed Ahead of New Tariffs

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

December corn was up 5 1/4 cents, November soybeans were down 5 1/4 cents, and September Kansas City (HRW) wheat was up 13 1/4 cents. (Tuesday's close)

CME Globex Recap:

With new rounds of tariffs from the U.S. and China set to be sprung on Friday, Asian stock markets are lower while U.S. and European stocks are trading higher. Commodities are broadly mixed with August crude oil modestly higher. U.S. grain futures begin trading again at 8:30 a.m. CDT.

OUTSIDE MARKETS:

Previous closes on Tuesday showed the Dow Jones Industrial Average down 132.36 points at 24,174.82 and the S&P 500 down 13.49 points at 2,713.22 while the 10-year Treasury yield ended at 2.84%. Early Thursday, DJIA futures were up 137 points. Asian markets are lower with Japan's Nikkei 225 down 170.05 points (-0.8%) and China's Shanghai Composite up 25.24 (-0.9%). European markets are higher with London's FTSE 100 up 33.25 points (0.4%), Germany's DAX up 153.27 points (1.2%), and France's CAC 40 up 49.33 points (0.9%). The euro was up 0.0031 and the U.S. dollar index was down 0.12 at 94.41. September 30-year T-Bonds were down 12/32nds while August gold was down $0.90 at $1,252.60 and August crude oil was up $0.39 at $74.53. Soybeans on China's Dalian Exchange were steady to lower and Malaysian palm oil futures were down 0.8%.

BULL BEAR
1) USDA's lower estimate of world ending corn stocks remains the best argument for corn prices' finding support. 1) USDA's good-to-excellent crop ratings still high for row crops and spring wheat.
2) Commercials turned net long in soybeans as of June 26, a recognition of value at these lower prices. 2) So far, no sign of China backing away from Friday's plans for a 25% tariff against U.S. soybeans.
3) Rising wheat prices in France remind us weather risk is still in play in 2018. 3) Downtrends remain in effect for corn, soybeans, and all three wheats with potential buyers difficult to entice.

MORE COMMODITY-SPECIFIC COMMENTS

CORN December corn finished up 5 1/4 cents Tuesday at $3.64 1/4 and will start trading again at 8:30 a.m. CDT on Thursday. Scattered showers fell across the central Corn Belt Wednesday with 90 degree temperatures reaching as far north as southern Iowa. The latest forecast is mostly dry for the Corn Belt the next ten days with rain expected along Gulf coast and Atlantic coast states the next seven days. Temperatures are expected to stay above normal, but probably won't be hot enough to significantly hurt yields. Technically, the trend in corn is still down and noncommercial net longs remain a bearish concern. However, USDA's outlook for lower world corn supplies in 2018-19 should help prices find support above last year's lows.

SOYBEANS November soybeans closed down 5 1/4 cents Tuesday at $8.64 1/4, finding it difficult to attract buying interest ahead of expectations for Friday's new tariffs from the U.S. and China. Friday's tariffs include a new 25% penalty against U.S. soybeans and other goods on Friday and threats of even more tariffs ahead. The concern, of course, is where this is all headed and how it will affect long-term trade with the world's largest soybean buyer. China is still expected to need U.S. soybeans this fall, so much of how this plays out is still dependent on U.S. weather. So far, the weather has been good enough to give the soybean crop a 71% good-to-excellent crop rating, which points to another large harvest this fall. However, the crop is not in yet as favorable weather will still be needed at pod-filling time in August. With weather uncertainty still ahead and anxiety building ahead of Friday's tariff deadline, soybean prices have plenty of potential for increased volatility this summer and so far, the trend in soybeans remains down.

WHEAT September K.C. wheat finished up 13 1/4 cents at $4.84 on Tuesday, still finding situations around the globe that remind us weather risk is still in play. Most recently, wheat prices in France jumped to their highest levels in nearly three years as moisture has been lacking in France and north-central Europe the past few months. Spring wheat crops in Siberia are also not doing well after a cold start to their season. Overall, it is still difficult to say that global wheat production will be down more than 3% from last year's record production so wheat supplies are still expected to be high. Here in the U.S., the spring wheat crop remains in excellent condition. The Jul/Sep Chicago futures spread showed a jump in commercial buying interest for SRW wheat, which also coincides with only two deliveries being made so far in July Chicago wheat. The trends remain down for all three wheats, but there is enough uncertainty to still encourage two-way trading in winter wheat.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.19 $0.06 -$0.33 Sep $0.009
Soybeans: $7.87 -$0.04 -$0.61 Aug $0.012
SRW Wheat: $4.65 $0.11 -$0.26 Sep -$0.002
HRW Wheat: $4.61 $0.12 -$0.23 Sep -$0.016
HRS Wheat: $5.12 $0.08 -$0.24 Sep -$0.005

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

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Todd Hultman