DTN Closing Grain Comments

Grains, Soybeans Mostly Lower Ahead of Mostly Dry Week

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

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 12 1/2 cents and November soybeans were down 12 1/4 cents. July KC wheat closed down 6 1/4 cents, July Chicago wheat was down 5 1/2 cents and July Minneapolis wheat was up 4 3/4 cents. The June U.S. dollar index is trading down 0.517 at 96.480. The Dow Jones Industrial Average is up 304.51 points at 26,025.17. August gold is up $2.20 at $1,344.90, July silver is up $0.11 at $15.01 and July copper is down $0.0275 at $2.6230. July crude oil is up $1.40 at $53.99, July heating oil is up $0.0349, July RBOB is up $0.0303 and July natural gas is up $0.017.

For the Week:

July corn finished down 11 1/4 cents at $4.15 3/4 and December corn finished down 10 cents at $4.33 3/4. July soybeans finished down 21 1/2 cents at $8.56 1/4 and November was down 21 3/4 cents at $8.83. Chicago July wheat finished up 1 1/2 cents at $5.04 1/2, Kansas City July closed down 24 cents at $4.49, and Minneapolis July finished up 4 cents at $5.52.

Corn:

Corn finished lower Friday despite rallying on Thursday without filling open chart gaps. July futures were down 4 3/4 Friday, pressured by a very weak soy market and prospects for a surge in planting over the next 6 to 7 days on a dry forecast for all but the southeastern U.S. Monday's crop 80% to 85% done versus last week's 67% record slow pace. An 80% planted number would leave roughly 18 million acres to go. Eastern Corn Belt states will continue to have issues, while the Western Corn Belt and Northern Plains should see lots of progress. U.S. corn, on the most recent rally, priced itself out of world markets; prices are much cheaper from South America and Ukraine. U.S. corn sales remain 13% lower than a year ago and it is likely USDA will be forced to cut exports by 75 million to 100 million bushels at some point. Also weighing on corn is the plan to slap a 5% tariff on incoming Mexico goods by June 10 unless the U.S. and Mexico can reach an agreement on the migration issue. While Tuesday's USDA report is expected to show a drop in both yield and acreage to account for excess water and late planting, the expectation is for a drop of only 3 to 5 bushels per acre on yield and maybe 3 million acres of corn. That is a far cry from many private analysts who see a drop of at least 6 million acres and potentially 7 to 10 bpa on yield. Monday will feature the first crop conditions on corn, but accuracy will surely be questioned and the trade does not expect anywhere near last year's 79% good to excellent or the recent average of 73%. Funds are now thought to have a modest net long in corn of 30,000 contracts. DTN National Corn Index closed at $3.95 on Thursday, 26 cents below the July contract.

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Soybeans:

Soybeans crashed and burned again Friday, fueled by a warmer-and-drier outlook for much of the central U.S. and slack demand. Soybean planting, which last week was record slow, is expected to rise from 39% done to 55% to 60% done as of Sunday. Soybeans are once again pressured by the overwhelmingly bearish supply both here and in the world, the lack of progress with China, weakening demand and the prospect for even more unwanted soy acres to be planted. The good news is U.S. soybeans are priced at a nice discount to Brazil and near parity with Argentina, making U.S. beans attractive to non-Chinese destinations. Early on Friday USDA announced a sale of 110,000 metric tons of soybeans to Egypt. Of that, 55,000 mt (2.02 mb) were for 2018-2019. However, while soybean sales last week were okay, they remain 16% below a year ago, and even new-crop sales at 56 mb, are well behind the 234 mb one year ago. A combination of too much supply and not enough demand will continue to plague the soy market in the absence of a China deal. Managed money funds are thought to still be holding a large net short of over 120,000 contracts to begin Friday's trade and likely added to that bearish bet today. Soybeans are thought to still have a fighting chance for a good crop despite the record late seeding pace. November soybeans have already filled one open chart gap and appear headed for a test of the next support at $8.70 soon. DTN's National Soybean Index closed at $7.88 Thursday, 81 cents below the July contract.

Wheat:

Both Chicago and Kansas City wheat finished modestly lower on Friday ahead of what could be a harvest weekend and despite Thursday's rally from the early lows. Kansas City new-crop July futures closed 50 cents per bushel under the high made Tuesday while Chicago is 25 cents lower. Managed money funds, which had been covering shorts, were thought to still be net short 30,000 contracts in Chicago as of Tuesday. Friday afternoon's CFTC Commitment of Traders report will give us a better idea. While we had some flooding rains again Thursday in parts of Kansas and Oklahoma, the market seems unconcerned. The prospect for not only quality issues but low protein content in this year's winter wheat crop is thought to be bearish the futures market and even corn as wheat competes for feed. A few problem areas exist in world wheat with notable areas being the Canadian Prairies, thought to be warm and dry until mid-month, along with a warm-and-dry ridge affecting Black Sea wheat. That heat and dryness is expected through June 21. Assuming things dry out in Oklahoma and Texas, it is possible to see wheat harvested in Northern Texas and Southern Oklahoma over the weekend. DTN's National HRW index closed at $4.34 Thursday, 21 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