DTN Before The Bell Grains

Morning CME Globex Update:

Dow futures are up 75 points early Thursday following a modest decline of 43 points Wednesday. July crude oil is up $1.98 as two tankers were attacked in the Gulf of Oman; the U.S. dollar index is up .0160 and August gold is up $2.30 an ounce.

Other Markets:

Dow Jones:	Higher
U.S. Dollar Index:	Higher
Gold:	Higher
Crude Oil:	Higher

Corn:

Corn is again higher, led by front-month July futures, reflecting a rising basis and threats of supply disruptions, especially in the Eastern Corn Belt where planting is lagging the most. Although Thursday morning's radar is fairly clear aside from light showers, the forecast for the weekend and early next week looks to turn wetter, further exacerbating planting efforts in the east. With managed money funds now appearing to have shifted from a record net short to net long over an estimated 120,000 contracts, both spot-month July and new-crop December appear to be slowly breaking out of a bullish flag chart pattern. A solid close above $4.54 on December and $4.39 on July is likely to lead to another surge higher. Following Tuesday's shocking slash of anticipated yield, acreage, production and carryout, corn got more good news Wednesday as ethanol production surged and stocks fell. Ethanol production last week rose 4.8% from the previous week, while stocks fell 3.3% to 21.8 million gallons -- down from the record of near 25 million just weeks ago. As expected, a host of private analyst and commission house estimates are filtering into the market as firms attempt to guess the next decline in both acres and yield on corn. A few of the ending stocks numbers on corn on Wednesday fell to 1.3 billion to 1.4 billion bushels from USDA's June estimate of 1.675 bb -- the lowest since 2013. As heavy rain is expected to affect the Eastern Corn Belt over the weekend, concern is building about the deficit of Growing Degree Days (GDD) and the forecast for the coming week is cooler than normal. All of the weather concerns point to pollination shoved further into the hottest part of the summer. Look for a rally and close above $4.39 on July and $4.54 on December to find some panicky shorts covering. Corn export sales for 2018-2018 for the week ended June 6 were 6.6 million bushels with total commitments of 1.906 billion bushels down 14%. Shipments last week of 35 mb were below the 38.2 mb per week needed to reach 2.2 bb. DTN's National Corn Index closed at $4.07 on Wednesday with an average basis of 23 cents under July.

Soybeans:

Following a USDA report on Tuesday that was not kind to soybean bulls, the market rallied sharply higher Wednesday as the focus begins to turn from corn planting to soybean planting. With 33.8 million acres of soybeans still unplanted as of Sunday, the market tries to estimate how many of those acres could go to prevented planting, and with the USDA Chief Economist suggesting that both yield and acreage on soybeans are likely to be revised in July, the estimates from private analysts begin to flow into the market. I saw an estimate from one commission house suggesting soy yield could fall by 2.5 bushels per acre from Tuesday's report. At this stage, it is a guessing game. But with funds still thought to be short an estimated 120,000 contracts of soybeans to begin Wednesday, we saw a nice short-covering rally. With back-to-back 1-billion bushel U.S. ending stocks, and a huge world supply, soybeans are still overall bearish, but if funds choose to lighten their bearish bet, we could certainly go higher. China has made some tough talk regarding any solution to the trade conflict and pessimism still reigns regarding the G20 meeting between presidents Donald Trump and Xi Jinping. Chinese buyers have reportedly asked U.S. sellers to delay soybean cargoes scheduled to ship in July to August, stoking fears again of cancellation of unshipped bushels. Soybeans will face some stiff technical resistance up near $9.00 to $9.10 on the spot July and major resistance at $9.20 to $9.40 lies above on new-crop November. Soybean export sales for the week ended June 6 were 9.4 mb for 2018-2019, and total commitments of 1.725 bb are 16% lower than last year. Shipments last week of 27.9 mb lagged the 30.3 mb per week needed to achieve USDA's projection of 1.7 bb. DTN's National Soybean Index closed at $7.99 and reflects an average basis of 79 cents under July.

Wheat:

Although Tuesday's USDA report once again reinforced the overall bearish wheat landscape, wheat has done nothing but go higher this week. Chicago July has now rallied 36 cents from the Monday low and has reached a new recent high. Excess rain is still expected to not only delay the already tardy hard red winter (HRW) harvest, but more heavy rains will affect Arkansas, parts of Illinois and Tennessee, halting soft red (SRW) harvest and increasing quality fears. Funds have been slow to cover wheat shorts and, coming into Thursday, were thought to still be holding a net short of close to 40,000 contracts. With a still burdensome 1-billion bushel U.S. carryout on wheat, a new world record large world ending stocks projection and large increase in major competitor stocks, there is little in the way of bullish news ahead of the U.S. harvest. There is also a wetter pattern evolving for dry parts of the U.S. Northern Plains and Canada. Heat and dryness in southern Russia continues to be a bullish input for wheat, as does the prospect for a sharp gain in wheat feeding in the U.S. As the harvest is slowly moving north, some reports are that protein very early in a delayed harvest is running about 1% behind normal. Low protein and off-quality wheat will likely supplant corn for feed in some areas of Kansas and Texas feedlots. While the wheat fundamental picture remains bearish, if corn should rally sharply it would be unlikely for wheat to break a lot. Wheat export sales for the week ended June 6 for 2019-2020 were 12 mb, and total commitments at 226 mb are up 36% from last year. Shipments of 14 mb were less than the 17.3 mb needed each week to reach 900 mb. DTN's National HRW Index closed at $4.44, and the average basis is at 19 cents under July.

Dana Mantini can be reached at dana.mantini@dtn.com

FollowDana on Twitter @mantini_r

(CZ)

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