DTN Closing Grain Comments

General Comments:

July corn closed down 4 3/4 cents per bushel and December corn was down 4 3/4 cents. July soybeans closed down 7 cents and November soybeans were down 7 cents. July KC wheat closed down 7 cents, July Chicago wheat was down 2 1/2 cents and July Minneapolis wheat was down 8 1/2 cents. The June U.S. dollar index is trading down 0.176 at 97.705. The Dow Jones Industrial Average is down 399.16 points at 25,377.45. June gold is up $10.70 at $1,284.90, July silver is up $0.16 at $14.61 and July copper is up $0.0065 at $2.6845. July crude oil is down $3.44 at $57.98, July heating oil is down $0.0875, July RBOB is down $0.0756 and June natural gas is up $0.022.

Corn:

In the past few overnight trading sessions corn has been hit hard early, but each time has managed to rally back. Thursday featured another run at key resistance close to $4.00 on July corn before news of a new farm aid package and much confusion over the same sent markets much lower, with July finishing 9 3/4 cents below the $3.99 resistance area. December corn also forged a new high for the move at $4.16 3/4 before dropping nearly 9 cents from that level. Thursday's rejection at the $3.99 area again on July could signal a double top at key resistance on the long-term weekly trend line. The weather still poses a big problem for corn planting with a wet pattern for the Plains and western Midwest; 3 to 7 inches of rain over the next 7 days will exacerbate seeding delays. Also, the extended forecast looks to be abnormally wet even into June 5. The funds, who have covered a sizable portion of their net short in the past 10 days, remained net short an estimated 160,000 contracts going into Thursday morning. It is likely funds bought again early on Thursday with little reprieve from excess water on the horizon. Corn sales for the week ended May 16 were a tepid 17.4 million bushels and total commitments at 1.864 billion bushels are 11% below a year ago. Shipments at 34.6 mb are below the 44.3 mb needed weekly to achieve USDA's 2.3 bb estimate for the marketing year. U.S. corn on the recent rally has likely priced itself out of many export markets. The failure to rally and close above long-term resistance on July could lead to a market setback, but any solid close above $4.00 may lead to another leg higher. New-crop December futures need to get above $4.18 to set up a run to $4.25, or also risk a selloff. DTN National Corn Index closed at $3.68 on Wednesday, 26 cents below the July contract.

Soybeans:

Soybean futures continued to take a backseat to corn and wheat on Thursday and have failed for seven straight days to rise above the short-term, 20-day moving average. Despite Monday's crop progress report detailing a seriously tardy seeding pace for soybeans of only 19% compared to an average of 47%, the trade has been reluctant to buy in as much as they have with corn. With a host of bearish factors overhanging the soy market, heavily net-short funds have chosen to remain that way. Coming into Wednesday night, trade funds were thought to be still holding a net short of close to 160,000 contracts. Fears of acreage switches from corn to soybeans, especially with a new hefty aid payment possible, very slack demand as South American new crop garners much of the business, and no new information on a China trade deal have weighed on soy values. The fact that China has 7 million metric tons (257 mb) of the unshipped U.S. soybean commitments is also heavy on the minds of U.S. exporters and farmers. A new $16 billion aid package including $14.5 billion in direct payments was announced at a midday news conference, but failed to state payment rates for each commodity and led to confusion and a quick selloff in the three major ag crops. Details on payment rates are reportedly forthcoming, but the gist of the package was that those payments would be based on a single county rate times a farm's total planting of crops in 2019, and is not dependent on which crops are planted in 2019. The three separate payments are said to be scheduled for July through August, the fall and early 2020. There remain roughly 115.8 million acres unplanted as of last Sunday on corn and soybeans combined based on March intentions. Look for the 20-day moving averages of $8.33 1/2 on July and $8.57 on November to be key. A rally and close above these levels could lead to a 30 to 40 cent gain. In the meantime, the bears remain in control and we will await further details on the aid payments. DTN's National Soybean Index closed at $7.40 Tuesday, 82 cents below the July contract.

Wheat:

Wheat had rallied sharply early Thursday morning, led by Chicago, but midday news of the proposed new farm aid package caused much confusion and sent both corn and wheat prices plunging to lower levels. Although details of the aid package are far from certain, Thursday's action, with both Kansas City and Minneapolis wheat having fallen below the 50-day moving average can only be a bearish sign. Nothing has changed with respect to weather with more heavy rain projected to affect maturing soft red and hard red winter wheat, with lodging, disease and lower yield impacts likely. In the Northern Plains, the remaining 30% of spring wheat to be planted will also face headwinds with heavy rain and cool weather hampering efforts there. Even though spring wheat supply certainly has a cushion, some analysts are looking at a potential acreage decline of 1 million acres compared to less than half that 10 days ago. Also pressuring wheat markets is the new contract high set on the U.S. dollar index. Wheat export inspections for the week of May 16 were dismal at 1.8 mb of old crop and 12.7 mb of new crop, but wheat commitments remain 8% higher than a year ago and weekly shipments of 32.5 mb were well above the weekly total needed to reach USDA's projection. DTN's National HRW index closed at $4.21 Tuesday, 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)

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