Grains reversed Wednesday’s overnight gains to close lower on Thursday as previously placed farmers’ sales offers added hedge pressure & speculators took profits from the recent rally ahead of 3-day weekend when grains stalled against weekly chart price resistance. Soybeans were initially higher on expectations that China would return as a strong buyer. Considering the most recent two weeks, soybean export demand certainly needs to improve. Thursday’s USDA Weekly Sales data showed a net cancellation of 7.882 mb of old- & only 0.254 mb of new-crop US bean sales in the weekly period ended May 17. Worse, last week’s net cancellation did not include the 30.461 mb cancellation by unknown destinations of old-crop soybeans that USDA reported on May 18. That will be a drag on next week’s sales report total. Wheat rallied as weather forecasts predicted hot & dry weather in the southern Plains into at least the first week of June. Talk that weather for other Northern Hemisphere wheat producers was also less than ideal magnified the concern for the US wheat crop. Corn initially followed the lead of beans & wheat, but then led Thursday’s downward reversal when July corn futures fell just short of price resistance at $4.14-4.17 set in June 2016. At Thursday’s close, July corn futures declined 4.25c, Dec. corn lost 4c, July soybeans dropped 3.5c, Nov. beans were 1.25c lower, July soymeal declined $3.40/ton, & July soft red winter wheat edged 3/4c lower.
Prices traded on both sides of unchanged on Thursday night, but beans & wheat eventually moved solidly higher on export hopes & weather worries, respectively. At the 7:45 am pause in electronic trading, July corn futures were up a penny, Dec. corn was 1.25c higher, July beans were up 4.25c, Nov. beans were 3.25 higher, July soymeal was up $1.40/ton & July SRW wheat was 6.75c higher. After an hour of trading on Friday, corn was about a penny higher, beans were about 6c higher & wheat was up about 10c. It would not be unusual to see traders even up positions prior to the close ahead of a 3-day weekend. Friday is also last trading day for June serial options on July futures contracts. That could result in some positioning near option strike prices.
After having reported on Thursday that unknown destinations bought 9.700 mb of 2017/18 US soybeans & cancelled 5.197 mb of 2017/18 US grain sorghum, USDA announced on Friday that China bought 11.464 mb of 2018/19 US soybeans & an additional 6.063 mb of 2018/19 optional-origin beans. The fact that the purchases were for new-crop likely reflects that many Chinese processors have already booked up their summer needs at a time when ports are reportedly full of Brazilian beans bought at significant discount to current US prices. China continues to sell corn out of 2- & 3-year-old stockpiles to domestic end users. A total of 48.813 mb of corn was auctioned at an average price of $5.65/bu. from state-owned reserves on Friday. That was just 31.1% of the quantity it offered even though prices were 30.5c/bu. below the average price paid on Thursday for the 117.487 mb of Chinese reserves. We suspect there were quality issues that accounted for the price difference. In Brazil, truckers have suspended for 15 days the road blockades they formed that had crippled grain, livestock & coffee deliveries. Truckers extracted government promises to subsidize diesel fuel costs this year by $1.37 billion.
In production news, private estimates continue to trim the size of the Brazilian Safrinha corn crop. Dry weather has hurt yields in the southern growing region. Brazilian analyst Agroconsult sees the winter-grown corn crop at 57 mmt—down 3 mmt from its previous forecast & 10 mmt below last year’s results. About 70% of Brazil’s total corn output is grown on acreage that was first planted to soybeans, but their dry season that usually starts in May came early this year. In Russia, private analyst IKAR now sees the 2018/19 Russian wheat production at 69.5-77.5 mmt, down from the 73-80 mmt output it previously forecast. The analyst looks for Russian wheat exports at 34.3 mmt in 2018/19, well below the 39.5 mmt of exports from 84.99 mmt of 2017/18 Russian wheat production that USDA estimated in May. Russian officials are said to be considering leaving their export tariff a zero into the 2018/19 marketing year to promote wheat exports.
Locally, corn basis was steady, soybean basis ticked 1/2c lower, & wheat basis was 1c higher on Thursday. Barge freight has been steady all week.
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"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL. To learn more about his farm marketing advisory or commodity brokerage services, contact him at firstname.lastname@example.org or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness. Commodity trading involves risks. You should fully understand those risks before trading.