DTN Closing Grain Comments

Grains Mostly Higher Despite Pending Tariff Threat

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

General Comments:

July corn closed up 2 1/4 cents per bushel and December corn was up 1 1/2 cents. July soybeans closed up 1/2 cent and November soybeans were steady. July Kansas City wheat closed up 1 cent, July Chicago wheat was up 2 1/4 cents and July Minneapolis wheat was up 7 1/2 cents.

The June U.S. dollar index is trading up 0.172 at 97.440. The Dow Jones Industrial Average is down 553.44 points at 25,885.04. June gold is up $1.50 at $1,285.30, July silver is down $0.03 at $14.90 and July copper is down $0.0505 at $2.7790. June crude oil is down $0.78 at $61.47, June heating oil is down $0.0284, June RBOB is down $0.0454 and June natural gas is up $0.016.

Corn:

July corn ended up 2 1/4 cents at $3.66 1/2 Tuesday, a quieter day of trading while ag prices are still bruised by Sunday's presidential tweets. In spite of U.S. threats to raise tariffs on Chinese goods, China's delegation is still planning to come and continue talks in Washington D.C. on Thursday and Friday. The notion that things are going well and an agreement is close at hand has been found lacking, and crop prices are feeling the bearish strain. Late Monday, USDA said 23% of the U.S. corn crop was planted as of May 5, the slowest progress since 2013. We can't say how many corn acres might be lost, but each week that passes with more moderate-to-heavy rain amounts in the forecast as we see again this week, makes the loss of corn acres more likely. Corn bears are gambling that a big 43-percentage point jump like we saw for May 19, 2013 will occur, but it remains to be seen if the weather will allow for that kind of broad, multi-state increase in 2019. The extended forecast does look drier for the Corn Belt, but below average temperatures are not helpful for drying fields. Trading may turn quieter this week as traders anticipate USDA's new-crop estimates in Friday's WASDE report. USDA is not likely to change its corn crop estimate much from February's 14.89 billion bushel (bb) estimate, but potential is there to come down in future reports. Technically, cash corn is near the middle of its 2019 trading range and the weekly stochastic has turned up. There were 1,396 contracts open in May corn early Tuesday. DTN's National Corn Index closed at $3.39 Monday, priced 25 cents below the July contract and back in its narrow, sideways range. In outside markets, the June U.S. dollar is up 0.17 and Dow Jones Industrials are down 553 points with the threat of more tariffs on the way. Non-ag commodities are mostly lower.

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Soybeans:

July soybeans snuck back a half-cent of Monday's 12-cent loss, closing at $8.30 3/4 on Tuesday. As mentioned above, China's trade delegation is still coming to Washington D.C. to continue talks on Thursday and Friday. However, the old descriptions of the two sides being close to an agreement have vanished in the wake of Sunday's threats of higher tariffs. The worst bearish scenario for U.S. soybean producers is that the U.S. grows another big soybean crop and fails to secure a trade agreement with China before harvest. So far, that scenario cannot be ruled out, and that is keeping soybean prices under bearish pressure, near their lowest prices in 10 years. In February, USDA estimated the 2019 soybean crop at 4.175 bb and Friday's new estimate is not likely to be much different. As with corn, there is planting uncertainty this year, and soybean plantings could go higher from a loss of corn acres or could stay near USDA's March estimate of 84.6 million acres if prevented plantings also show up for soybeans. Topsoil moisture levels remain high from Illinois to Ohio and flash flood watches are issued in Kansas, Missouri and Arkansas. USDA said late Monday that 6% of soybeans were planted as of May 5, down from the five-year average of 14%. Fundamentally, it is difficult to make a case for higher soybean prices unless some surprise emerges, either from trade talks or weather. Technically, in this bearish environment, noncommercials remain comfortably net short a record high 118,335 contracts and the trend is clearly down. May soybean contracts are slowly dwindling away, now showing 1,797 contracts open as of early Tuesday. DTN's National Soybean Index closed at $7.45 Monday, priced 85 cents below the July contract and near its lowest price in 12 years.

Wheat:

July KC wheat started the day lower, but ended a penny higher at $4.04, finding slight support again on Tuesday. Flash flood watches remain in effect for Kansas, Missouri and Arkansas. Monday's Crop Progress report showed USDA still rating 64% of winter wheat as good to excellent, but all is not well everywhere. Ohio, Michigan and Illinois have poor-to-very poor ratings between 20% and 30%, due to excessively wet conditions. Some of the highest good-to-excellent ratings are in Montana and the Pacific Northwest. USDA also said 22% of spring wheat was planted, down from the five-year average of 49% with progress still lacking in Minnesota and the Dakotas. July Minneapolis wheat ended up 7 1/2 cents Tuesday, reflecting some growing concern. With the International Grains Council estimating a 4% increase in world wheat production in 2019, there is not much expectation Friday's USDA estimates will have anything bullish to say. The old-crop estimate of U.S. ending stocks is headed toward 1.1 bb and the new-crop estimate is not apt to look much different. Fundamentally, that makes it difficult to expect much upside potential in wheat prices, but there is plenty of growing season ahead and room for surprise. Technically, spot KC wheat is near its lowest prices in 13 years, while the weekly stochastic is close to showing a bullish change in momentum and deserves monitoring. Trading has become dangerously thin for May wheat contracts with expiration set for May 14. DTN's National HRW index closed at $3.88 Friday, up from its lowest close in over a year and 15 cents below the July contract. DTN's National SRW index closed at $4.10, holding above its March low.

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

FollowTodd on Twitter @ToddHultman1

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Todd Hultman