DTN Closing Grain Comments

U.S. Crop Prices Plummet as Tariff Deadline Nears

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

General Comments:

July corn closed down 11 cents per bushel and December corn was down 9 1/2 cents. July soybeans closed down 14 1/2 cents and November soybeans were down 14 3/4 cents. July Kansas City wheat closed down 5 3/4 cents, July Chicago wheat was down 9 1/2 cents and July Minneapolis wheat was down 3 1/4 cents.

The June U.S. dollar index is trading down 0.218 at 97.170. The Dow Jones Industrial Average is down 141.16 points at 25,826.17. June gold is up $4.00 at $1,285.40, July silver is down $0.08 at $14.79 and July copper is down $0.0040 at $2.7705. June crude oil is down $0.49 at $61.63, June heating oil is down $0.0162, June RBOB is down $0.0030 and June natural gas is down $0.015.

Corn:

July corn fell 11 cents to $3.53 1/4 Thursday, a bearish caving of prices as the realization continues to grow that a trade agreement with China may not be near. Chinese negotiators are in Washington D.C. for two days of talks, and any comments from the meeting will get attention, but the overall atmosphere does not look good as the U.S. seeks to increase tariffs on $200 billion of Chinese good after midnight Eastern Time and is also considering placing tariffs on another $325 billion of Chinese goods later. The move could lead to a deal or to retaliation by China, and there is a chance we will find out which it is on Friday. Meanwhile, more rain fell in the southeastern U.S. and eastern Midwest Thursday, allowing a mostly drier forecast for the Corn Belt to move in the next 10 days. After a period of drying, this should allow for some planting progress, but Indiana and Ohio continue to have rain in the forecast. Early Thursday, USDA said last week's corn export sales hit a marketing year low of 11.3 million bushels (mb), while shipments totaled 45.4 mb. So far, the corn shipment pace remains on track for USDA's export estimate, but more sales are needed. Later, USDA said 4.4 mb (107,000 metric tons) of U.S. corn were sold to Colombia for 2018-19. Friday's WASDE report is likely to start 2019-20 U.S. ending corn stocks out a little above 2.0 billion bushels (bb), in line with the past three years. Technically, cash corn is near the middle of its 2019 trading range and the weekly stochastic has turned up. There were 853 contracts open in May corn early Thursday. DTN's National Corn Index closed at $3.38 Wednesday, priced 26 cents below the July contract and back in its narrow, sideways range. In outside markets, Dow Jones Industrials are down 141 points and non-ag commodities are mixed.

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Soybeans:

July soybeans dropped 14 1/2 cents to $8.12 3/4 Thursday, sliding to new contract lows while China faces new rounds of higher tariffs from the U.S., the first increase due in less than twelve hours. There is no argument that the outlook for soybean prices looks heavily bearish as USDA is expected to estimate record-high ending soybean stocks of 900 mb or more on Friday and the number is at risk of coming in higher as U.S. soybean exports are not keeping pace with USDA's export estimate of 1.875 bb by the end of August. Early Thursday, USDA said last week's sales showed a net cancellation of 5.5 mb and shipments came in at a lower-than-needed 22.3 mb. Later, USDA said 4.4 mb (120,000 mt) of U.S. soybeans were sold to unknown for 2018-19 and another 9.1 mb (249,000 mt) were for 2019-20. While we have to agree that the prospects for a trade agreement look grim at the moment, issues like that can change quickly and the uncertainty of it all also remains a potential source of volatility for prices. Soybeans have more time for planting and are at risk of picking up some corn acres, but it also seems fair to expect more prevented plantings in 2019, which will shrink the total pie of plantings. Dow Jones' survey expects new-crop U.S. ending soybean stocks at 943 mb, similar to the current season, but there is a lot of room for that to change -- bullish or bearish -- as we learn more about the new season and the status of trade with China. Technically, the trend in cash soybean prices remains down with noncommercials comfortably net-short. May soybean contracts are slowly dwindling away, now showing 1,207 contracts open as of early Thursday. DTN's National Soybean Index closed at $7.42 Wednesday, priced 86 cents below the July contract and near its lowest price in 12 years.

Wheat:

July KC wheat closed down 5 3/4 cents at $3.97 3/4, a mild bearish hit compared to the rest of Thursday's grain complex. July Chicago wheat lost more, ending down 9 1/2 cents at $4.29 1/2 and staying near its contract lows. Wheat prices continue to be pressed down by heavy U.S. ending supplies that Friday's WASDE report is likely to peg at 1.1 bb. Just eight months ago the ending stocks estimate was lower at 935 mb, but the exports expected in the second half of the season just didn't show up. Thursday morning's export sales report added to the disappointment, showing last week's export sales at a new marketing year low of 3.3 mb. New-crop wheat sales did better at 15.1 mb. The seven-day forecast expects more rain from Texas to New York, catching soggy wheat fields in Indiana and Ohio once again. Outside of North America however, no significant problems are being reported, a major reason potential buyers are staying away for now. 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. DTN's National HRW index closed at $3.88 Wednesday, up from its lowest close in over a year and 16 cents below the July contract. DTN's National SRW index closed at $4.12, holding above its March low. Trading is thin for May wheat contracts with expiration set for May 14.

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

FollowTodd on Twitter @ToddHultman1

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Todd Hultman