DTN Closing Grain Comments

General Comments:

July corn closed up 12 1/4 cents per bushel and December corn was up 11 1/4 cents. July soybeans closed up 29 cents and November soybeans were up 29 cents. July Kansas City wheat closed up 11 3/4 cents, July Chicago wheat was up 11 1/2 cents and July Minneapolis wheat was up 5 cents.

The June U.S. dollar index is trading up 0.150 at 97.270. The Dow Jones Industrial Average is up 348.05 points at 25,673.04. June gold is down $5.40 at $1,296.40, July silver is up $0.01 at $14.79 and July copper is up $0.0070 at $2.7260. June crude oil is up $0.86 at $61.90, June heating oil is up $0.0255, June RBOB is up $0.0177 and June natural gas is up $0.038.

Corn:

The abnormally late planting pace reported on Monday afternoon, along with the oversold condition and a huge fund short led to a continuation of Monday's reversal from new lows. Corn planting, reported at just 30% complete, was up just 7% on the week, and is the slowest planting pace on record for the second week in May. Last year's planting pace was 59% in the same week and the five-year average is 66%. Major states like Illinois, at just 11% versus 82% average, Indiana, at 6% versus 69%, and Ohio at just 4% compared to 50% average, has the trade seriously questioning not only USDA's 92.8 million acres, but the trend yield is at 176 bushels per acre. The delay in seeding, following a short window of opportunity, is likely to continue, especially in the central U.S. and upper Midwest next week, with moderate-to-heavy rains leading to ideas of sharply higher prevent-plant acres this year. Despite the failure for the U.S. and China to forge a final trade deal, and instead announcing increased tariffs, it would seem that much of the bearishness may have already been penciled in. Managed funds, who have relished the recent price plunge, may not feel so warm and fuzzy now, and Monday began to reel in some shorts, having bought 15,000 contracts of an estimated net-short of 340,000 contracts to begin Tuesday. No doubt that fund short-covering extended through Tuesday, and end users, fearing lower acres and yield began to buy corn needs as well. The seeding pace is now being compared to both 1993 and 2013, with this year's pace of 30% as of May 12, comparing to 1993 at 27% and 2013 at 28%. In 2013, not only did yields falter, but prevent-plant acres surged. Tuesday's rally came within a half of a cent of hitting the key 50-day moving average on July ($3.71 1/4), above which funds will typically cover shorts. DTN's National Corn Index closed at $3.31 Monday, priced 25 cents below the July contract. In outside markets, the Dow Jones average is surging at up 348 points, with crude oil up 85 cents per barrel.

Soybeans:

Soybeans on Monday closed lower but finished significantly above the new contract lows set early. On Tuesday, that late recovery extended, with July beans closing 40 cents above the lows. There's a bit more bullish tone on the U.S.-China trade conflict after President Trump indicated he would meet China's President Xi Jinping on June 28 at the G-20 meeting in Japan, and that negotiations would continue despite both sides raising tariffs, which helped markets. Despite the scheduled meeting, President Trump's statements about giving more aid to U.S. soy farmers (a reported $15 billion) is an indication to the trade that this conflict will drag on. Also encouraging funds to cover some of their record net-short position was the lagging pace of soybean seeding. The meager 9% pace is well behind the 29% average an up just 3% on the week. Next week's weather will again be a challenge, with moderate-to-heavy rains slated for many areas. Most Midwest states are said to be anywhere from 10% to 30% behind the average pace, but Mississippi, Minnesota, Arkansas and Illinois appear to be the areas most impacted. Soaking rains are projected in the 6- to15-day portion of the two-week forecast, with the central U.S. and upper Midwest likely to be wettest. The good news is that the USDA reported 180,000 metric tons (mt) (6.6 million bushels) of U.S. soybeans for 2018-2019 sold to unknown under the daily reporting system. With the recent surge in South American soybean basis levels and Brazilian beans trading as high as 82 cents over the July futures on Friday, U.S. soybeans are now very competitive, except to China. African swine fever continues to play a bearish role, along with the trade impasse, with Vietnam now having culled a reported 4% of their pig herd, or 1.2 million head, due to the spread of African swine fever. The impact of African swine fever, when all is said and done, may even be greater than earlier thought, with China's total soybean imports falling from 94.1 million metric tons (mmt) in 2017-18 to 86 mmt in 2018-19, and the U.S. Ag Attache seeing China's purchases fall to just 83 mmt in 2019-20. Tuesday's rally has seen the gap on the November chart being filled, with July's gap still slightly above the highs. DTN's National Soybean Index closed at $7.18 Monday, priced 84 cents below the July contract and near its lowest prices in 12 years.

Wheat:

All three wheat markets were along for the ride higher on Tuesday, following the reversal from new contract lows set on Monday in both Chicago and Kansas City. Wheat inspections for last week came in at double the prior week -- a good sign for burgeoning U.S. wheat stocks. While winter wheat conditions were an unchanged and bearish 64% good to excellent, concerns of disease and production issues in eastern soft red wheat (SRW) areas, and a lagging spring wheat planting pace were bullish inputs. Fears of wheat disease (fusarium) in soft red winter is becoming more widespread. Spring wheat planting did advance a respectable 23% for the week, but at 45% complete, is badly lagging the 67% average pace, and South Dakota is just 4% done. While the U.S. hard red winter (HRW) wheat areas are slated to remain well-watered, too much rain will continue to plague planting and soft red winter states. Ohio, Michigan and Illinois are excessively wet. Next week's heavy rains are expected to fall in eastern Kansas, Missouri and Illinois. Also helping to buoy the wheat market on Tuesday is a lengthy hot spell expected in many Russian wheat areas into month's end. There are a host of wheat tenders around, with Algeria, Tunisia and Taiwan all tendering for wheat, although South Korea bought 30,000 mt of Aussie 11% protein wheat. Ethiopia completed their purchase of 400,000 mt of optional origin wheat. Funds remain short a large wheat position, especially in Kansas City, with much of the bearish news likely in the market already. DTN's National HRW index closed at $3.82 Monday, 15 cents under the July contract and up from its lowest prices in over a year.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow Dana on Twitter @mantini_r

(CZ)

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