By Kirk Maltais
--Wheat for July delivery fell 1.7% to $4.96 a bushel on the Chicago Board of Trade Tuesday. Grains traders sols in reaction to favorable weather conditions in competing wheat-growing areas.
--Soybeans for July delivery fell 0.2% to $8.67 a bushel.
--Corn for July delivery fell 0.1% to $3.29 a bushel.
HIGHLIGHTS
Supply Surplus: July wheat futures on the CBOT fell below $5 per bushel Tuesday, reversing the recent rally. Weather conditions in competing wheat-growing areas look to be supportive for bigger crops, said Terry Reilly of Futures International. One example is Russia, where wheat crops face freezing later this week before favorable weather sets in over the weekend. "Spring wheat could be burned back... but permanent losses should not occur to this crop," says Reilly. Needed rain is expected in other competing areas like Australia and South America, says Reilly. In the USDA's WASDE report last week, the agency forecast that world wheat production would grow by over 4 million tons in 2020.
Quality Defect: Corn futures fell Tuesday, but found some support after the USDA crop progress report showed a 4% decline in crop quality from the previous week. Corn in good or excellent condition totaled 71%, according to the report, down from 75% last week. "Looking at some of the subsoil moisture levels they have been drawing down the past few weeks so the downtick in conditions does make some sense," said Richard Buttenshaw of Marex Spectron. Even so, traders were expecting conditions to be unchanged or move 1 percentage point in either direction, says Buttenshaw.
INSIGHT
Sifting Through Soy: The presence of China as a main soybean export buyer in recent weeks has provided fuel for CBOT soybean futures, said Todd Hubbs of the University of Illinois. Soybean futures have risen over 3% since the start of the month, and 6.5% since finding a year-low in late April. "A continuation of the recent rally appears dependent on export strength as production potential remains at levels seen entering the planting season," said Hubbs. Since Thursday, the USDA has announced 1.2 million metric tons of sales of soybean exports to China. However, yesterday's crop progress report showed little interruption to soybean planting, with 93% of the U.S.soybean crop planted - up from 72% at this time last year.
Still Trailing: U.S. ethanol production is expected to jump again this week, and U.S. inventories are expected to decrease. However, even with this trend being positive for ethanol producers - and by extension corn producers - ethanol production is still not where it needs to be to support USDA projections for corn demand. "Ethanol economics are improving, but as a reminder an average of 288 million gallons per week is needed to meet the USDA's old crop corn industrial use forecast," said AgResource.
Send Help: The renewable energy industry, which includes segments like the ethanol industry, will need extended aid in order to make it through the economic fallout of the coronavirus pandemic, said Frank Pallone Jr., chairman of the House Committee on Energy and Commerce. Specifically, stimulus packages making their way through Congress need to include measures to help renewable energy, said Pallone - including extending tax credits that have been provided to renewable energy producers. "The lack of certainty in renewable tax credits has hurt our industry," said Pallone, adding that as many as 850,000 clean energy workers may file for unemployment benefits by the end of the month. Tax credits for clean energy have been scheduled to be reduced this year and next.
AHEAD:
--The EIA releases its weekly update on ethanol production and inventories at 10:30 a.m. ET Wednesday.
--The USDA will release its latest weekly export sales numbers at 8:30 a.m. ET Thursday.
--The USDA will release its monthly Cattle on Feed report at 3 p.m. ET Friday.
--The CFTC releases its weekly commitment of traders report at 3:30 p.m. ET Friday.
Write to Kirk Maltais at kirk.maltais@wsj.com
