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WASDE Wrap: What's Ahead for the U.S. Grains Now That USDA Has Spoken?

The USDA has spoken. Tuesday's WASDE report ultimately sent soybean futures sharply lower based on lower old-crop ending stocks and massive new-crop ones. Corn and wheat futures found themselves making their way into negative territory, too, by the day's end Tuesday.

Now the trade sets its sights on some of the trends flowing under grain prices moving beyond corn and soybean planting in the U.S. and well into the summer. One thing is certain after Tuesday's data: The big stocks numbers mean it will take something pretty major, crop weather-wise, in order for the grain bulls to get a breath of life soon.

"When you think about the last five or six years, you could not help but look at the weather and think the extreme is the norm. Something extreme has happened every year to change how things are priced," says Virginia McGathey, president, McGathey Commodities. "Something completely outlandish is the only thing that could come in here and take prices higher. And even if we have something extreme happen in the U.S., there is so much grain in the world that it would cause a hiccup, but I don't know if it would create a trend around the world."

There could be some upside coming, however, specifically for wheat and corn. Wheat harvest is approaching and right now, corn futures aren't too far off their harvest lows, both scenarios that typically precede price bumps, says Jack Scoville, vice president, The PRICE Futures Group. That makes the next few weeks a critical time frame if you're looking to make a sale, regardless of what Mother Nature does in corn and soybean country.

"For the near term, I'm going to use this break in prices to make sure I've got some corn on the books, because we're getting close to $3.50. When you go back and look at where the harvest lows were, we're not that far away," Scoville says. "To me, do we want to make new lows at this time with the crop just finishing getting in the ground with a whole growing season in front of us? There's not a heck of a lot of upside, but six weeks down the road, we may see a 15-cent bounce. The beans I guess I'll have to leave alone after the price action today. They're also getting relatively cheap."

There are a few global factors to watch, too: First, what happens with monetary policy -- namely a tax on exports -- could have an influence on the supply of wheat flowing from Russia. Also, general weakness in the Euro and other currencies abroad will likely help keep prices under pressure in the U.S.

"When you look at wheat specifically, Russia took their export tax to about $1 a ton, so basically next to nothing," Scoville adds. "That will push them back into the wheat market and will affect wheat prices . . . it already has to some extent, and will put a damper on prices. Since the Euro is not exactly super strong against the dollar, it's going to keep our prices under pressure."

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