July corn is down 3 1/4 cents per bushel, July soybeans are down 4 cents, and July K.C. wheat is down 3 1/2 cents.CME Globex Recap:
Equities are weaker around the globe again Thursday as additional tweets by President Trump on Wednesday seemed to muddy the waters further. President Trump tweeted that China "broke the deal" while China said it would retaliate with "necessary countermeasures" if the U.S. raises tariffs. It would seem unlikely China would be willing to negotiate or accept a trade deal with a proverbial gun to its head in the form of additional tariffs, but nothing can be ruled out ahead of Friday. Grain markets are weaker across the board with better weather forecasts across the Midwest next week while trepidation exists ahead of the May WASDE Friday. The supply situation should look big for U.S. crops on Friday as the USDA will not take into account any flooding or prevent planting.
Previous closes on Wednesday showed the Dow Jones Industrial Average up 2.24 at 25,967.33 and the S&P 500 down 4.63 at 2,884.05 while the 10-year Treasury yield ended at 2.482%. Early Thursday, the June DJIA futures are down 205 points. Asian markets are lower with Japan's Nikkei 225 down 200.46 (-0.93%) and China's Shanghai Composite down 42.8 points (-1.48%). European markets are lower with London's FTSE 100 down 19.69 points (-0.27%), Germany's DAX down 76.97 points (-0.63%) and France's CAC 40 down 61 points (-1.13%). The June euro is down 0.000 at 1.120 and the June U.S. dollar index is down 0.018 at 97.370. The June 30-year T-Bond is up 15/32nds, while June gold is up $3.50 at $1,284.90 and June crude oil is down $0.34 at $61.78. Soybeans on China's Dalian Exchange were up 0.88% while soybean meal was up 1.3%.
The Fusarium Risk Assessment Tool from Penn State is showing a high risk of the disease, which promotes vomitoxin across the entire winter wheat belt.
|1)||Brazilian Consultancy AgRural raised its estimate of that country's corn crop to 99.2 million metric tons (mmt) vs. 80.7 mmt last year.|
Fourteen-day percent of normal precipitation maps from NOAA show large swaths of Kansas, Missouri, Oklahoma, Texas, Arkansas, Illinois and South Dakota running 150% to 400% of normal precipitation.
Weekly ethanol production missed the level needed to achieve the USDA's ethanol demand for corn forecast for the 16th week in a row.
Weekly ethanol stocks fell by another 227,000 barrels last week to 22.468 million barrels, the lowest figure since July.
|3)||Russian research firm SovEcon maintained their estimate of the Russian wheat crop at 83.2 mmt vs. 71.7 mmt last year and the record 85.2 mmt in 2017-18.|
CORN Corn futures are lower Thursday, following through on overnight session weakness as the headlines surrounding the trade war continue to provide whiplash. One-minute China wants to make a deal, followed by reports they are ready to retaliate with additional tariffs, or at least that's how financial media is portraying the situation. Technically, the long-term trend remains down, momentum indicators have turned lower and funds have likely pushed their net-short to a new record. Adding to the bearish sentiment are large crops getting larger in South America as AgRural bumped their estimate of Brazilian corn production to a new record of 99.2 mmt. Even with the higher production estimate, USDA's current demand and ending stocks forecast for Brazil looks appropriate based on recent history. That said, if Argentina's crop estimate remains unchanged at 47 mmt, combined Brazilian and Argentine corn production would total 146.2 mmt vs. 114 mmt a year ago. Exports as they stand Thursday would be over 15 mmt larger than a year ago, representing 600 million bushels (mb) of corn global importers did not have access to a year ago. Along with record Ukrainian production last fall, the three-country supply total of 195.6 mmt would be up 22.3% from a year ago and a big reason for the late planting in the U.S. failing to elicit a better response in price. Weekly ethanol production of 1.036 million barrels per day missed the roughly 1.086 million barrels needed to reach the USDA forecast, and should all but guarantee a cut to the forecast on Friday's WASDE.
SOYBEANS Soybean prices are weaker Thursday, taking the mostly bearish trade-war headlines as expected with traders anxiously awaiting Friday's WASDE and conclusion to whatever talks do occur. One thing is for certain, and that is buying or selling grain futures based on the latest headline will lead to financial ruin. Volatility has ramped up as would be expected in front of two high-risk events on Friday. July at-the-money (ATM) volatility settled Wednesday at 18.59% vs. 14.75% a week ago. Rising volatility at the end of a pronounced downtrend as momentum indicators are attempting to diverge could be a good thing for bulls trying to keep powder dry on the sidelines. With 1 to 4 inches of rainfall falling across nearly every square inch of the Midwest this week, it seems inevitable soybean acres will be rising from the March Prospective Plantings report. As we've discussed before, even with 80 million bushels of additional demand, acreage at the March USDA level would result in a carryout over 1 billion bushels (bb) with trend-line yields. If acres were to rise by 1 million to 2 million, carryout closes in on 1.1 bb, which would max out any price correlation chart completely off its axis.
WHEAT Weaker wheat markets across the board as the ag-wide sell-off induced by trade rhetoric continues. Heavy rains fell across Kansas, Oklahoma and Texas in the last seven days, putting the finishing touches on a crop where it didn't flood. HRW prospects look stellar while SRW production continues to labor under excess moisture with rising disease concerns. Every state that produces soft red wheat except Michigan is being flagged for high-risk of fusarium head blight, which is the disease that causes vomitoxin. A large outbreak of vomitoxin could reduce the supply of milling SRW at a time when deliverable stocks are going to end the marketing year at multi-year lows. Cash markets would take over the function of pricing the high-vomitoxin wheat versus milling SRW wheat. Elsewhere, SovEcon confirmed their Russian wheat crop estimate at 83.4 mmt vs. 71.7 mmt last year and the record 85.2 mmt from 2017-18. If production were confirmed at that level, it would seem to us exports would easily be able to reach 36 mmt to 37 mmt with the potential to ship as much as 39 mmt to 40 mmt while still maintaining adequate carryover stocks. Based on weather to date and looming prevent-plant dates, South Dakota should see a meaningful drop in spring wheat acreage to possibly record lows. There is still enough time to seed intended acres in North Dakota, Montana and northern Minnesota, although the ideal planting window for maximum yield potential is closing.
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Tregg Cronin can be reached at email@example.com
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