DTN Closing Grain Comments

USDA Cuts Corn Crop Estimate

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

General Comments:

July corn closed up 12 cents per bushel and December corn was up 12 1/2 cents. July soybeans closed up 3/4 cent and November soybeans were up 1 1/4 cents. July KC wheat closed up 4 1/2 cents, July Chicago wheat was up 10 1/2 cents and July Minneapolis wheat was up 1 cent. The June U.S. dollar index is trading down 0.101 at 96.610. The Dow Jones Industrial Average is down 9.56 points at 26,053.12. August gold is up $2.30 at $1,331.60, July silver is up $0.09 at $14.73 and July copper is up $0.0075 at $2.6690. July crude oil is down $0.02 at $53.24, July heating oil is up $0.0144, July RBOB is up $0.0231 and July natural gas is up $0.040.

Corn:

July corn closed up 12 cents at $4.27 3/4 Tuesday after USDA reduced its estimate of U.S. ending corn stocks for 2019-20 from 2.485 billion bushels (bb) to a less-than-expected 1.675 bb. USDA took 3 million acres off plantings and reduced the expected yield from 176 bushels per acre to 166 bpa, both reflecting this year's planting difficulties. Given USDA's lack of hard data in June, it was commendable them for to take this modest step in the obvious direction of where the 2019 corn crop is likely headed. USDA also reduced the estimate of world ending corn stocks in 2019-20 from 314.71 mmt to 290.52 mmt (11.44 bb), the lowest in four years. Late Monday, USDA said 83% of corn was planted and 63% was emerged, still showing signs of serious problems in 2019. Significant unplanted acres remain from Illinois to Ohio, also Michigan and South Dakota. Adding to these challenges, the seven-day forecast expects heavy rain amounts from eastern Kansas through the Eastern Corn Belt and into Ontario and the northeastern U.S. In spite of USDA's lower crop estimate, there is still plenty of potential for more reductions. Fundamentally speaking, the outlook for corn prices remains neutral to bullish with a possibility of significantly lower ending corn stocks in 2019-20 still in play. Technically, the trend of cash corn prices remains up and appears to be finding resistance near $4.54, its four-year high. DTN's National Corn Index closed at $3.91 Monday, 25 cents below the July contract and near its highest prices in four years. Outside markets were quieter Tuesday with other commodities mostly higher.

Soybeans:

July soybeans ended up 3/4 cent at $8.59 1/4 Tuesday after USDA increased its estimate of 2019-20 U.S. ending soybean stocks from 970 mb to 1.045 bb, a little more than expected. The increase came from a 75 mb reduction in old-crop exports, a small acknowledgement of soybeans' export problems. USDA slightly reduced its estimate of world soybeans stocks from 113.09 mmt to 112.66 mmt (4.14 bb) for 2019-20, a neutral adjustment. Late Monday, USDA said 60% of U.S. soybeans were planted and 34% were emerged as of June 9, much slower than their usual paces, as everyone should understand by now. Typically, the incentive of this year's Market Facilitation Program would inspire adequate planting, but the aid is unspecified and, in the eastern Midwest, the weather is not cooperating with more heavy rains expected the next seven days. This year's production risk is helping soybean prices trade above their 2019 lows and it is still not clear how much of the crop will get a chance to start. Aside from planting problems, the outlook for soybean prices remains overwhelmingly bearish as long as China holds its 25% tariff on U.S. soybeans. Technically, soybean prices are currently chopping sideways, while staying below the 100-day average at $9.00. DTN's National Soybean Index closed at $7.79 Monday, 80 cents below the July contract and falling back from resistance near $8.00.

Wheat:

July KC wheat traded lower early, but closed up 4 1/2 cents at $4.57 1/2 Tuesday, influenced by the rally in corn. Late Monday, USDA repeated that 64% of winter wheat crops are rated good-to-excellent. In addition, 83% of winter wheat was headed and 4% was harvested, which raises concerns about more heavy rains in the seven-day forecast for the southwestern U.S. Plains. For spring wheat, USDA said 85% of the crop was emerged and 81% of the crop USDA could see was rated good to excellent, the highest since 2010. Tuesday's WASDE report reduced its estimate of U.S. ending wheat stocks for 2019-20 from 1.141 bb to 1.072 bb, thanks to a 50 mb increase in feed demand and a 25 mb increase in the old-crop export estimate. Minor adjustments aside, U.S. ending wheat supplies are still burdensome to prices at 52% of annual use. USDA increased its estimate of world ending wheat stocks from 293.01 mmt to a record high 294.34 mmt (10.82 bb), nudged up by 1 mmt increases in the crop estimates for Ukraine and Russia. World wheat production is expected to increase 7% in 2019-20 to a record high 780.83 mmt (28.69 bb). Technically, the trend is currently up for cash SRW and HRS wheats and sideways for HRW wheat. DTN's National HRW Index closed at $4.34 Monday, down from its recent three-month high and 19 cents below the July contract. DTN's National SRW Index closed at $4.91, also down from its highest prices in three months.

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

Follow him on Twitter @ToddHultman1

(CZ)

Dana Mantini