DTN Closing Grain Comments

This Rain Ain't Makin' Grain

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

General Comments:

July corn closed up 14 1/2 cents per bushel and December corn was up 11 3/4 cents. July soybeans closed up 8 1/4 cents and November soybeans were up 8 cents. July KC wheat closed up 16 3/4 cents, July Chicago wheat was up 19 1/4 cents and July Minneapolis wheat was up 13 3/4 cents.

The June U.S. dollar index is trading down 0.263 at 97.460. The Dow Jones Industrial Average is up 79.12 points at 25,569.59. June gold is down $1.60 at $1,283.80, July silver is down $0.06 at $14.55 and July copper is up $0.0180 at $2.6985. July crude oil is up $0.43 at $58.34, July heating oil is up $0.0024, July RBOB is up $0.0211 and June natural gas is up $0.017.

For the week:

July corn closed up 21 cents and December 2019 corn was up 21 1/2 cents. July soybeans were up 8 cents while November 2019 soybeans were up 9 cents. July Kansas City wheat was up 21 3/4 cents, July Chicago wheat was up 24 1/2 cents, and July Minneapolis wheat was up 20 1/4 cents.

Corn:

July corn closed up 14 1/2 cents at $4.04 1/4 Friday, its highest price since August as more heavy rains worked their way across the western and central Corn Belt, which is part of a seven-day forecast that still looks very wet. A flood watch is in effect from the Texas Panhandle to northern Illinois with warnings in southeastern Kansas and Missouri. Even the six to 10 day forecast leans wet for much of the Corn Belt, not an encouraging forecast for corn planting as we head into Memorial Day weekend. Thursday's announcement of farmer aid from USDA threw a wrench into bullish expectations for corn prices, as the offer for an undetermined amount of aid for producing an eligible crop undermined the notion that farmers may elect to take prevented corn planting in 2019. Part of that imbalance was restored with later news that the U.S. Senate approved $3 billion of disaster aid for farmers, including money for prevented plantings in 2019 (see "Disaster Relief Advances" by DTN Ag Policy Editor Chris Clayton in Friday's DTN https://www.dtnpf.com/…). Public pressure may encourage USDA to be more forthcoming about its plan, but for now, there is confusion in an otherwise short-term bullish market environment for corn prices. Early Friday, USDA said 4.45 million bushels (113,000 mt) of U.S. corn were sold to Mexico for 2018-19. According to the Buenos Aires Grain Exchange, Argentina's corn harvest is 36% complete. Fundamentally, current planting problems are making it possible to have fewer ending stocks of corn in 2019-20 and that is keeping speculative shorts on the defensive. Technically, the trend is up as cash corn prices are near the high end of their 2019 trading range. DTN's National Corn Index closed at $3.63 Thursday, 27 cents below the July contract and in the shadow of last year's high of $3.75. In outside markets, Dow Jones Industrials are trading modestly higher and other commodities are mostly higher.

Soybeans:

July soybeans closed up 8 1/4 cents at $8.29 3/4 Friday, managing a modest 8 cent gain in a week of up and down trading. On one hand, planting conditions haven't been any better for soybeans than they have for corn, but of course soybeans have more time available to plant. The bearish elephant in the room continues to be the lack of trade with China and the odds of that changing look slim at the moment. Thursday's announced aid package from USDA was intended to keep producers from planting more soybeans than usual just to get financial help. However, in the process, many important details were left out and now there is a lot of confusion over what the best planting choices are, not knowing how payments will be affected. The one message that was clear is that producers have to produce something to get a check from USDA's Market Facilitation Program in 2019, an odd public policy choice after six consecutive years of good weather, big crops and growing grain surpluses. Late Thursday, the Buenos Aires Grain Exchange said 85% of Argentina's soybeans had been harvested. Fundamentally speaking, as U.S. soybean exports struggle, U.S. ending soybean stocks will likely exceed 1 billion bushels in 2018-19 and that is keeping cash prices under pressure, near their lowest levels since 2007. Technically, the trend in cash soybeans remains down. DTN's National Soybean Index closed at $7.39 Thursday, still near its lowest prices since 2007 and priced $0.82 below the July futures contract.

Wheat:

July KC wheat jumped up 16 3/4 cents Friday, salvaging a 21 3/4 cent gain on a week that got help once again from higher corn prices and noncommercial short-covering. According to USDA's Crop Progress reports, winter wheat is doing just fine with 66% of crops rated good or excellent. This week's rains may have challenged that view somewhat as southeastern Kansas and Missouri experienced flood warnings, and more rain is expected the next 10 days. In the bigger picture, Australia continues to contend with dry weather, but most other major wheat regions are finding favorable conditions at this time. Earlier Friday, Dow Jones reported private analysts at SovEcon estimated Russia's wheat exports at 1.40 billion bushels (bb) or 38.2 million metric tons (mmt) for 2019-20, up from USDA's current estimate of 1.32 bb or 36.0 mmt. Fundamentally, expectations for increased world wheat production in 2019 and another year of exports dominated by Russia are exerting bearish pressure on U.S. wheat prices. Cash HRW wheat prices are roughly 80 cents a bushel below USDA's cost of production estimate, a cheap level that continues to discourage expansion in the U.S. Technically, Friday's closes turned the trend up for SRW and HRS wheats and back to sideways for HRW wheat. Prices dipped low enough to find long-term support, but heavy U.S. supplies remain a bearish concern. DTN's National HRW index closed at $4.10 Thursday, down 16 cents from the July futures contract and up from its one-year low in early May. DTN's National SRW index closed at $4.46 Thursday, up from its lowest prices in over a year and near its 100-day average.

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

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(CZ)

Todd Hultman