Fund Liquidating, Crop Weather Pressure Row-Crop Prices

EARLY MORNING GLOBEX NET CHANGES: July corn is down 1/4 cent per bushel, July soybeans are up 4 1/4 cents, July KC wheat is down 1 3/4 cents, July Chicago wheat is down 1/4 cent, and MIAX July Minneapolis wheat is down 0.0175 cents.

CME GLOBEX RECAP: On Tuesday, July corn dropped 3 1/2 cents, July soybeans dropped 15 1/2 cents, and July KC wheat was down 12 1/4 cents. Soybean and soft red winter wheat basis strengthened on Tuesday, while corn, hard red winter wheat, and hard red spring wheat held steady. In general, the futures markets are pressured by funds liquidating amid favorable crop weather and the idea that prices could grind lower throughout the summer. July corn reached a four-month low on Tuesday. Demand for corn and soybeans remains strong. Analysts see Wednesday’s weekly Petroleum Status Report showing steady ethanol production. Traders would prefer to see confirmation of a U.S.-China trade deal in the form of soybean sales. That said, favorable crop weather will likely keep a lid on rallies in June. A skirmish broke out between the U.S. and Iran on Tuesday when the U.S. disabled an empty oil tanker attempting to break through the U.S. blockade in the Strait of Hormuz. On Wednesday, the EIA will release the weekly Petroleum Status report at 9:30 a.m. CDT, including last week’s ethanol production. There are no other major reports scheduled.

OUTSIDE MARKETS: The previous close on Tuesday showed the Dow Jones Industrial Average up 228.91 points to 51,307.79 and the S&P 500 up 9.82 points to 7,609.78. The 10-Year Treasury yield ended at 4.455%. Early Wednesday, the June Dow Jones Futures are down 203 points. European markets are lower, with the spot futures of London’s FTSE 100 trading down 0.3%, the spot futures of Germany’s DAX trading down 1.16%, and the spot futures of France’s CAC 40 Index trading down 0.42%. Asian markets are higher, with Japan’s Nikkei 225 Index up 2.5% and China’s Shanghai Composite Index up 0.22%.

The June Euro is down 0.002 to 1.162, and the June U.S. Dollar Index is up 0.131 to 99.315. The September 30-Year T-Bond is down 12/32nds, while August gold is down $49.60 at $4,470.30, and July crude oil is up $3.12 at $96.88. On China’s Dalian Exchange, July corn was down 0.26% while July soybeans were up 1.02%, September soybean meal was down 0.3%, and August Malaysian Palm Oil was trading up 3.09%.

MORE COMMODITY-SPECIFIC COMMENTS

CORN:

Corn futures are down 1/4 of a cent early Wednesday, with the July contract at $4.40 1/4 per bushel. The national average basis for corn was steady at 36 cents under the July futures contract, while the DTN National Corn Index was down 3 cents at $4.05. With July futures trading near a four-month low, this week traders will eye the January 15 low of $4.34. Price pressure comes from a wetter-looking forecast for the Midwest over the next two weeks. Analysts expect weekly ethanol production for the week ended May 29 to range from 1.06 to 1.11 million bpd, steady with the previous week’s level. Stocks are seen ranging between 24.3 million and 25.0 million, compared with 24.9 million a week ago. Earlier this week, the USDA reported that U.S. ethanol plants used 427.7 million bushels (mb) of corn in April, down 10% from March, which was expected. USDA is still expecting a 3% annual increase in corn demand for fuel ethanol.

SOYBEANS:

Soybean futures are up 4 1/4 cents on Wednesday, with the July at $11.69 1/2 per bushel. The national average basis for soybeans was 1 cent stronger at 60 cents under the July futures, while the DTN National Soybean Index was down 15 cents at $11.05. Technically, the July contract’s support level is $11.70. A breakthrough of the 100-day moving average at $11.66 1/2 would make the new low range at $11.00. Like corn, soybean price action is faced with favorable crop-growing weather. On the bullish side, domestic soybean demand for biofuels and feed remains strong amid rising crush premiums. Therefore, traders will be expecting the USDA to raise usage in its June WASDE Report next week.

WHEAT:

Wheat futures are down 1 3/4 cents early Wednesday morning, with the July contract at $6.32 1/2 per bushel. The national average basis for hard red winter (HRW) wheat was unchanged at 61 cents under the July futures contract, while the DTN National Hard Red Winter Wheat Index was down 12 cents at $5.74. The national average basis for hard red spring (HRS) wheat was unchanged at 44 cents under the MIAX Minneapolis July futures contract, while the DTN National Hard Red Spring Wheat Index was down 15 cents at $5.93. July futures dropped on Tuesday for a ninth straight session. Abundant global supplies and a steady crop expected from Canada and parts of the U.S. are trumping market concerns about future crop losses from reduced fertilizer use. The U.S. winter wheat crop holds the lowest rating on record. As harvest gets underway, yield monitors will tell the real story of this drought-stricken crop. Meanwhile, Australia’s crop experts forecast a 26% drop in the country’s wheat production due to drought and reduced fertilizer availability stemming from the war in Iran.