DTN Closing Grain Comments

Tariff Talk Nudges Grains to New Lows

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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(DTN illustration by Nick Scalise)

General Comments:

Corn was down 7 3/4 cents in the September contract and down 7 1/2 cents in the December. Soybeans were down 22 3/4 cents in the August contract and down 23 1/4 cents in the November. Wheat closed down 20 1/4 cents in the September Chicago contract, down 20 3/4 cents in the September Kansas City, and down 12 cents in the September Minneapolis contract.

The September U.S. dollar index is up 0.58 at 94.46. August gold is down $12.10 at $1,243.30 while September silver is down 27 cents, and September copper is down $0.0930. The Dow Jones Industrial Average is down 206 points at 24,713. August crude oil is down $3.34 at $70.77. August heating oil is down $0.0987 while August RBOB gasoline is down $0.0802 and August natural gas is up 0.039.

Corn:

December corn fell 7 1/2 cents to another new contract low of $3.53 1/4 on Wednesday, pressured by moderate temperatures in the back half of the 10-day forecast and better chances for a broad coverage of rain, even including Missouri. Before corn sees cooler temperatures, however, there are a few more hot days to get through, especially in the Western Corn Belt, where nighttime temperatures will also be above normal. In addition to bearish weather factors, investors turned broadly defensive again Wednesday after the U.S. prepared a list of $200 billion worth of new 10% tariffs against China set to be enacted by Aug. 31. Most commodities were trading lower as were major stock markets. Dow Jones' survey of analysts expects USDA to increase its estimate of U.S. ending stocks for 2018-19 from 1.577 billion bushels (bb) to 1.733 bb, based on a higher crop estimate of 14.33 bb. The higher crop estimate is reasonable, but the ending stocks guess looks low as corn demand has been trailing last year's pace. For now, the trend remains down for December corn and short-term support at $3.60 has been broken. DTN's National Corn Index closed at $3.16 Tuesday, near its lowest prices in 2018 and 32 cents below the September contract. There were 249 delivery intentions for July corn early Wednesday. In outside markets, the September U.S. dollar index is up 0.58 after Wednesday's tariff news. August crude oil is down $3.34, helped by expectations for Libyan oil exports to resume, reported Marketwatch.com.

Soybeans:

November soybeans fell 23 1/4 cents to $8.48 1/4 Wednesday, the lowest November close in nine years after the U.S. proposed another $200 billion worth of 10% tariffs against China, slated to be enacted by Aug. 31. If investors treating soybeans like the plague weren't enough to pressure prices lower, weather could make a pretty good case by itself. Hot temperatures are expected in the next five days, especially in the western Midwest, but a broad coverage of rain and more moderate temperatures is also expected in the six- to 10-day outlook. There is always a chance that a solution with China could unexpectedly emerge, but there is certainly no sign of that yet. Dow Jones' pre-report survey expects USDA to raise its estimate of U.S. ending soybean stocks for 2018-19 from 385 million bushels (mb) to 491 mb, thanks largely to less demand after China's July 6 tariff. So far, the trend remains clearly down for soybeans with trade issues an ongoing concern. DTN's National Soybean Index closed at $7.96 Tuesday, still near its lowest price in over nine years and priced 60 cents below the August contract. Among July contracts, delivery intentions totaled 447 for soybeans, 878 for soybean oil, and still none for meal early Tuesday. Early Wednesday, 905 July soybean meal contracts were open, ahead of Friday's expiration.

Wheat:

September Chicago wheat closed down 20 1/4 cents to $4.71 3/4, the lowest close in five months. Commercial selling was evident as it starts to look more apparent that this year's limited production problems will probably not be significant enough to ease world supplies much. Dow Jones' survey expects USDA to reduce its estimate of world ending wheat stocks for 2018-19 from 266.2 million metric tons (mmt) to 264.1 mmt (9.70 bb). If true, that is a 3% reduction from the previous season's record high ending stocks. USDA's estimate of U.S. ending wheat stocks is expected to increase from 946 mb to 982 mb, also not much of a reduction from the previous season's 1.08 bb. The winter wheat harvest is likely making good progress Wednesday, but rain is expected to interrupt work the next five days, which will give spring wheat crops a little more help. From North Dakota to the Pacific Northwest, however, the seven-day forecast is mostly dry. There is a chance Thursday's WASDE report could hold a surprise, but for now, the trends for all three wheat futures remain down. DTN's National SRW index closed at $4.67 Tuesday, within its trading range of the past two months and 25 cents below the September contract. DTN's National HRW index closed at $4.73, at the lower end of its two-month trading range. Trading in July wheat contracts has become dangerously thin and delivery intentions totaled 70 for K.C. wheat and one for Chicago, but none for Minneapolis wheat early Wednesday.

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

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Todd Hultman