DTN Closing Grain Comments

Bearish Rout Continues

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

General Comments:

July corn closed down 4 1/4 cents per bushel and December corn was down 3 3/4 cents. July soybeans closed down 6 3/4 cents and November soybeans were down 6 3/4 cents. July Kansas City wheat closed down 9 1/2 cents, July Chicago wheat was down 6 1/2 cents and May Minneapolis wheat was down 7 3/4 cents.

The June U.S. dollar index is trading up 0.360 at a new contract high of 97.680. The Dow Jones Industrial Average is down 41.03 points at 26,615.36. June gold is up $5.70 at $1,278.90, May silver is up $0.14 at $14.93 and May copper is up $0.0175 at $2.9110. June crude oil is down $0.33 at $65.97, June heating oil is down $0.0157, June RBOB is down $0.0069 and June natural gas is unchanged.

Corn:

July corn fell to another new contract low Wednesday, losing 4 1/4 cents to $3.56 on higher volume. Wednesday's weather map shows rain in central Texas and some showers in the eastern Midwest, but the Corn Belt is mostly dry, allowing for partial planting. The southeastern Corn Belt is expecting rain the next few days and the central Corn Belt is in line for moderate-to-heavy amounts this weekend into early next week. The six- to 10-day forecast calls for above normal precipitation for the central and northern Corn Belt, keeping questions open regarding corn planting in 2019. Wednesday morning, the U.S. Energy Department said last week's ethanol production increased from 1.016 million barrels to 1.048 million barrels per day, a little above USDA's estimated pace. Ethanol inventory was unchanged at 22.7 million barrels. So far, noncommercials are not showing any concern about potential problems with new-crop corn and remain content with their record bearish bets, bolstered by expectations that corn exports from Brazil and Argentina will be higher in 2019. Fundamentally, if all goes well, the U.S. could see a corn crop around 15 billion bushels in 2019, which could translate to either steady or modestly higher ending corn stocks in 2019-20. There is, however, plenty of uncertainty this early in the season. Technically, corn futures are sagging lower, enduring heavy selling from the speculative crowd. Cash prices are holding firmer than futures contracts, but Wednesday's new four-month low turns that trend down. DTN's National Corn Index closed at $3.31 Tuesday, priced 29 cents below the May contract and near its lowest prices in four months. In outside markets, the June U.S. dollar index is trading up 0.36 at a new contract high with the first estimate of first-quarter U.S. GDP due out Friday morning. Other commodities are mixed to mostly lower.

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Soybeans:

July soybeans closed down a third consecutive day, ending down 6 3/4 cents at $8.68 3/4. Soybean prices continue to be plagued by a number of bearish concerns. China's 25% tariff on U.S. soybeans, concerns that some corn acres will go to soybeans, and the anticipation of record ending soybeans stocks in 2018-19, possibly even more than USDA's 895 million bushel estimate are all weighing on soybean prices. As if all those were not enough, this week's White House decision to impose sanctions on countries buying oil from Iran gives China another argument with the administration that is likely to adversely influence U.S.-China trade talks. As mentioned above, some U.S. planting activity is getting a chance this week before more rain returns this weekend and into the following week. Brazil's harvest is getting closer to the finish line and Argentina's soybean harvest just passed the one-third mark last week. Fundamentally speaking, the current estimate of ending U.S. soybean stocks at 22% of annual use still points to lower prices ahead unless some kind of bullish surprise can emerge either from the trade talks or from weather. Technically, the trend in May soybeans turned down a week ago, on April 17. DTN's National Soybean Index closed at $7.81 Tuesday, priced 81 cents below the May contract and at its lowest prices in three months.

Wheat:

After a one-day pause, noncommercial selling in wheat picked up again, sending July KC prices down 9 1/2 cents to another new contract low of $4.11 1/2 Wednesday. July Chicago was also lower, dropping 6 1/2 cents and returning back near its contract low. Rain fell across central Texas Wednesday and the seven-day forecast has some rain expected over the HRW wheat crop, but most will fall on the SRW wheat crop in the eastern Midwest where conditions are already too wet. As Monday's USDA report showed, winter wheat's good-to-excellent crop ratings are currently the highest in seven years, so it remains difficult to come up with a bullish argument for prices. Earlier Wednesday, Statistics Canada said all wheat acres in Canada will be up 4% in 2019, roughly as expected. Spring wheat plantings are expected to increase 12% to 19.4 million acres, while durum will be down 19%. Outside of North America, there are a few minor concerns, but conditions are mostly favorable in major wheat growing regions. September milling wheat futures in Paris fell 1 1/2 euros to a new contract low Wednesday, suggesting no serious weather concern in Europe. With less than a week left in April, noncommercial selling remains the dominant feature and the trends of all three cash wheat prices are down, searching for support. DTN's National HRW index closed at $4.03 Tuesday, 12 cents below the May contract as prices continue to search for support. DTN's National SRW index closed at $4.15, near its lowest prices in over a year.

Todd Hultmancan be reached at todd.hultman@dtn.com

FollowTodd on Twitter @ToddHultman1

(CZ)

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Todd Hultman