DTN Closing Grain Comments

Weather Concerns Drive Corn Higher; Soybeans Plummet

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN illustration by Nick Scalise)

General Comments:

July corn closed up 4 1/4 cents per bushel and December corn was up 1 3/4 cents. July soybeans closed down 18 cents and November soybeans were down 17 1/2 cents. July KC wheat closed up 3 1/2 cents, July Chicago wheat was down 2 cents and July Minneapolis wheat was steady. The June U.S. dollar index is trading up 0.127 at 97.805. The Dow Jones Industrial Average is up 15.42 points at 25,878.10. June gold is down $10.50 at $1,275.70, July silver is down $0.14 at $14.40 and July copper is down $0.0115 at $2.7365. June crude oil is down $0.13 at $62.74, June heating oil is down $0.0289, June RBOB is down $0.0134 and June natural gas is down $0.004.

For the week:

July corn was up 31 1/2 cents and December corn was up 25 1/2 cents. July soybeans were 12 1/2 cents higher, while November beans were 14 cents higher. Chicago July wheat was 40 1/4 cents higher, Kansas City July wheat was 33 1/4 cents higher and Minneapolis July wheat was 10 3/4 cents higher.

Corn:

Corn was once again firmer and set a new weekly high on Friday, ahead of an extremely wet forecast for the next 10 days that threatens to halt corn and soy seeding, especially in a few of the major states that are already well behind. Illinois and Indiana are most notable. Illinois progress by this Sunday could be just 20% complete on corn compared to an average of over 80%. Rain totals of 3-5 inches in much of the heart of the Corn Belt, with as much as 10 inches or more possible in Kansas, Missouri and even into Illinois, will surely push some planting into June, when a noticeable yield impact will be felt. Planting progress as of Sunday, May 19, is likely to be no more than 45% to 50% complete. Many in the trade are already debating the extent of corn switching (to soy) and prevented planting acres, which some analysts have already predicted could be record large, and approaching 4 million acres. During the course of this 42-cent rally in July corn, managed money fund short-covering along with end user buying have been the impetus for gains. With the recent fall in the Brazilian Real to new lows, Brazilian farmers have been willing sellers on the rally as well, as they harvest a record crop. Good news is that the U.S. and Canada and Mexico have come to an agreement to eliminate metal tariffs, paving the way for ratification of the USMCA trade pact. Funds remained short an estimated 260,000 contracts to begin Friday, signaling much more firepower for further gains if they decide to exit. Friday's closely watched CFTC report will give us a better picture. However, on July there is plenty of resistance at $3.85 to $3.90, and new-crop December futures ran into a roadblock at the psychological $4.00 level, with strong resistance up to $4.08. DTN National Corn Index closed at $3.54 Thursday, 25 cents below the July contract.

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Soybeans:

With few concrete plans to advance the U.S-China trade talks aside from the G20 summit at the end of June, and with lagging demand and fears that China could cancel unshipped sales without a trade deal, soybeans were on a bearish island this Friday -- plummeting 18 cents by the close. Funds had covered a portion of their record net soybean short up until Friday, but the fundamentals, with record U.S. and world supplies and uncontained African swine fever cutting into demand, appear to be too overwhelming. Funds were thought to be still short a sizeable 160,000 contracts of beans to start Friday. Rumors are China has in the past week or so bought as many as 40 to 50 cargoes of Brazilian beans, prompting a surge in their FOB basis. Even with Brazil capturing the lion's share of China business, their January through April soy shipments to China are down 13% according to Cargonave, a shipping agency. While the primary focus is on weather and planting pace with respect to corn, soybeans are also well behind and soon that could become an issue. However, the thought that some corn and spring wheat acres might still be switched to beans is another bearish input the soy complex can ill afford. The soybean market has 436 mb still unshipped with China accounting for 257 mb of that. A move by managed funds to exit their entire short would still lead to a sizeable rally, but Friday's action says the bears are still firmly in control. DTN's National Soybean Index closed at $7.56 Thursday, 83 cents below the July contract and near its lowest prices in 12 years.

Wheat:

Wheat markets early Friday continued to correct from a very oversold condition and a net short that was record large in Kansas City and sizeable in Chicago. However, only Kansas City was able to finish higher Friday, while Chicago and Minneapolis finished 8 and 15 cents below their daily highs. Chicago July wheat had rallied 54 cents above the Monday low but Friday's late sell-off prevented a fifth consecutive higher close. In sympathy with the surging corn market, and also a victim of weather, funds had decided to reel in some of their bearish bet on wheat. Although some spring wheat planting has occurred in the last few days, the next 10 days promises to be a challenge, with heavy rains likely beginning this weekend. In soft red winter (SRW) country, the already flood-prone and soggy SRW areas are set to get deluged with water again. Missouri, Illinois and Indiana are a few of the states looking at big rain totals. Fear of fusarium disease is growing and the above-normal temperatures next week in the SRW belt is fueling fears of vomitoxin. Even excess rains projected for eastern Kansas could cause issues for hard red winter (HRW). While wheat export sales and shipments have finally exceeded those of last year, the burdensome U.S. and world stocks of wheat will surely limit the upside of any rally going forward. DTN's National HRW Index closed at $4.01 Thursday, 16 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 him on Twitter @mantini_r

(CZ)

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Dana Mantini