DTN Closing Grain Comments

General Comments:

July corn closed up 5 3/4 cents per bushel and December corn was up 6 1/4 cents. July soybeans closed up 10 cents and November soybeans were up 10 1/2 cents. July KC wheat closed up 14 1/4 cents, July Chicago wheat was up 13 1/4 cents and July Minneapolis wheat was up 17 3/4 cents. The June U.S. dollar index is trading down 0.049 at 97.775. The Dow Jones Industrial Average is down 69.79 points at 25,694.21. June gold is up $1.20 at $1,276.90, July silver is up $0.05 at $14.44 and July copper is down $0.0115 at $2.7270. June crude oil is up $0.14 at $62.90, June heating oil is down $0.0255, June RBOB is down $0.0375 and June natural gas is up $0.044.

Corn:

The dynamic corn rally continued Monday with July corn now 47 cents per bushel higher than the lows set just a week ago. There are now two gaps left on the July chart and one on the December chart. A wet weekend, along with a 10-day forecast that shows very little open weather for planting, along with an excessively short managed-money fund position has driven corn sharply higher and into a major resistance zone. That area is $3.95 in July corn and $4.05 to $4.08 in new-crop December corn. Friday's CFTC Commitment of Traders report showed funds had only bought in 9,000 contracts of their short, leaving managed-money funds net short 298,000 contracts as of last Tuesday. Since then, they have undoubtedly covered much more of that short, but estimates are as of Monday they may still be short a hefty 230,000 corn contracts. So far, the U.S. farmer has been a reluctant seller as his/her focus is on planting, while the South American farmer is the only possible out for funds. With South American currencies lower, there has been an incentive to sell and a pick-up in farmer selling. Also adding fuel to the corn fire was the announcement the tariffs on metals on Canada and Mexico would be dropped, paving the way for a potential ratification of the North American trade pact called USMCA. Monday's USDA Crop Progress report will be huge with traders expecting a corn planted number of 45% to 50% and that would compare to 81% on average. The prevented planting date is said to be May 25 in western and northern corn areas and estimates of how many acres will not be planted are growing by the day. The yield impact on late-planted corn, with May 20 being a key cutoff, begins to escalate going forward. DTN National Corn Index closed at $3.58 Friday, 25 cents below the July contract.

Soybeans:

Following Friday's soybean plunge of 18 cents, the soy complex closed higher Monday, recovering over half the loss, but has been much more reluctant than corn and wheat. The recent break down and escalation in antagonistic rhetoric between the U.S. and China, and sparse demand, have kept the pressure on soy. It has been rumored China bought as much as 5 mmt to 6 mmt of Brazilian beans since trade talks broke down, fueling a surge in that basis, along with the fall in the Brazilian real currency. The good news is non-China buyers are likely to come to the U.S. as the U.S. discount to Brazil on a FOB basis is now $21/mt, though still a premium to Argentina. Soybeans also are lagging severely in planting with Monday afternoon Crop Progress likely to show soybeans at just 19% to 25% planted compared to the average of 44%. Soybeans also will be looking at yield drag as we get into June, but that has taken a backseat to corn and wheat concerns of late. Managed funds, as of last Tuesday, were reported to have a record net-short soybean position of 171,000 contracts. They surely covered some last week, but the remaining short will be plenty of firepower for a further rally if this wet trend continues into June. Right now, unlike wheat and corn, both July and new-crop November soy futures remain under the 20-day moving average. The next U.S.-China meeting may not occur until the G20 summit in late June, where it is expected Presidents Donald Trump and Xi Jinping will talk trade. African swine fever remains uncontained and once again reared its ugly head this weekend with another outbreak in China and the first ever case in Hong Kong. The U.S. Soybean Export Council fears China is unlikely to return to its record soybean purchase volume as demand has suffered. DTN's National Soybean Index closed at $7.39 Friday, 83 cents below the July contract.

Wheat:

All three wheat futures markets soared Monday, fueled by both fund buying and the prospect for wheat losses and quality issues due to the excessive rain. With major storms hitting key hard red winter states, the threat of lodging and wheat disease promises to impact hard red winter wheat (HRW) also, which has been, up to this point, in the best condition in years. Soft red winter states, such as Missouri, Illinois and Indiana look to have severe weather as well, affecting an already poorly rated SRW crop ahead of harvest. As in corn and soybeans, managed-money funds have been playing the short side of futures, as not only are U.S. ending stocks a burdensome 1.1 billion bushels, but the world has a record supply of wheat. Since the recent contract lows were established a week ago, Kansas City July has now rallied 57 cents with Chicago now up 65 cents from the lows. Funds have undoubtedly reined some of their short in since last Tuesday, but remain short a sizeable position. Should the funds decide to lift all of this short, we could see this rally extend quite a bit. Traders will be watching the Crop Progress report to see how far along spring wheat planting is, with the average guess close to 63%. DTN's National HRW Index closed at $4.05 Friday, 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 him on Twitter @mantini_r

(CZ)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.