DTN Closing Grain Comments

Corn, Soybeans Higher as Rally Quiets

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

General Comments:

July corn closed up 3/4 cent per bushel and December corn was up 1 cent. July soybeans closed up 4 cents and November soybeans were up 3 1/4 cents. July KC wheat closed down 6 3/4 cents, July Chicago wheat was up 1/4 cent and July Minneapolis wheat was down 8 cents. The June U.S. dollar index is trading up 0.028 at 97.350. The Dow Jones Industrial Average is up 162.35 points at 25,694.40. June gold is up $1.20 at $1,297.50, July silver is down $0.01 at $14.81 and July copper is up $0.0210 at $2.7460. June crude oil is up $0.30 at $62.08, June heating oil is up $0.0275, June RBOB is up $0.0395 and June natural gas is down $0.051.

Corn:

July corn edged higher for a third consecutive gain, finishing up 3/4 cent at $3.69 1/2 Wednesday. The main lift for corn prices is coming from a 7-day forecast expecting heavy rain totals for the central and Western Corn Belt at a time when planting progress is historically low and speculators are caught heavily net short in the market. Eastern Canada is another area where planting is at a standstill, experiencing cold and wet conditions. The most obvious bullish risk to prices is that actual planting will likely fall short of USDA's 92.8 million acre estimate, possibly by three million acres or more. The other risk is possible yield loss from late-planted corn and abnormally wet field conditions. Credible yield estimates are still a long ways off as WASDE's first field survey comes in September this year. The U.S. Department of Energy said ethanol production picked up again last week, increasing from 1.036 million per day to 1.051 million, the annualized equivalent of 5.75 billion bushels of corn. Ethanol inventory slipped from 22.5 million barrels to 22.3 million as seasonal demand picks up. Corn prices shouldn't be expected to keep rising the way they have the past two days, but current factors are favoring higher prices and it will take time to get a handle on acres and yield in 2019. Technically, cash corn has held support and is back above its 1-year average. The weekly stochastic also confirms a bullish change in momentum. DTN's National Corn Index closed at $3.30 Monday, 25 cents below the July contract and still in its narrow, sideways range. In outside markets, Dow Jones Industrials are up 162 points and the June U.S. dollar index is quiet, trading up 0.03. Most commodities are higher Wednesday.

Soybeans:

July soybeans finished a second consecutive day higher, closing up 4 cents at $8.35 1/2 on Wednesday. There are unofficial reports of China making large soybean purchases in Brazil, which seems credible after trade talks broke down between the U.S. and China. On May 6, FOB soybean prices in Brazil were 18 cents below those in New Orleans, but on Wednesday, Brazil's FOB price of $9.31 a bushel was 42 cents higher than its equivalent in New Orleans. Obviously, the U.S. is still contending with a 25% tariff from China and trade talks are not looking hopeful at the moment, but we can't say China has lost its appetite for soybeans. As with corn, it is difficult to say how many soybean acres will be planted this year. Some corn acres may run out of time and have to go to soybeans, but many acres are also at risk of being classified as prevented plantings. Fundamentally, it is difficult to see much potential in this 2-day rally as record ending soybean stocks are not apt to go away easily, even if a trade agreement were reached this summer. USDA's update of weekly exports will be watched Thursday and it is difficult to expect much improvement, given current conditions. Technically, the trend in cash soybean prices remains down with noncommercials tested by the recent rally, but probably not moved much. DTN's National Soybean Index closed at $7.19 Monday, 84 cents below the July contract and near its lowest price in 12 years.

Wheat:

After trading over 14 cents higher earlier in the session, July KC wheat closed down 6 3/4 cents at $4.02, attempting and failing to secure a third higher close. July Chicago wheat was able to hold a slight gain, ending up 1/4 cent. Wednesday's weather map was mostly dry across the central U.S., but the next 7 days are expecting heavy rain amounts over the central and western Plains and also across the northwestern U.S. Overall, the forecast is favorable, even though local flooding may create problems in eastern Kansas and Missouri. Similar to soybeans, it is difficult to see much fundamental hope for wheat prices in 2019 unless adverse weather becomes a factor. USDA is currently giving the winter wheat crop its highest good-to-excellent rating in nine years. Outside of North America, the early outlook for major wheat regions is mostly favorable. The International Grains Council expects a 4% increase in world wheat production in 2019 and USDA expects a 6% increase. Technically, spot KC wheat is struggling to get a lift from its lowest prices in 13 years and is also lacking fundamental support. DTN's National HRW Index closed at $3.97 Monday, up from its lowest close in over a year and 15 cents below the July contract. DTN's National SRW Index closed at $4.09, also up from its lowest close in over a year.

Todd Hultman can be reached at todd.hultman@dtn.com

Follow him on Twitter @ToddHultman1

(CZ)

Todd Hultman