DTN Before The Bell Grains

Morning CME Globex Update:

Following a 39-point gain in the Dow Jones average on Wednesday, Dow futures are up 238 points early Thursday. June crude oil is up $1.69 per barrel, the U.S. dollar index is down .5110, and August gold is up $35.30 an ounce.

Other Markets:

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

Corn:

Corn continues to correct from huge gains over the past month. Although the debate rages on about how many acres will be enrolled in prevented planting and how much further yield could be affected, many of the bullish projections have made their way into media sources. The recent $1.20 to $1.30 rally in corn may have priced in a loss of 1.5 billion to 2 billion bushels of corn production. Just as supply has been decimated by excessive rains and planting delays, so too has demand started to be rationed. U.S. corn is no longer competitive in world markets, and South American exportable supplies seem to be on the move higher. With just 10% of the safrinha corn harvest in Brazil complete, analysts keep ratcheting production higher in the face of some record yields. Currently, not only are U.S. corn prices well above those of world barley on an FOB basis, but also an estimated 50k to 60 cents per bushel over both South American and Black Sea corn offers. U.S. corn outstanding sales as of June 6, at just 281 million bushels, compares to 623 mb last year. On the domestic front, rumors abound about southeast animal feeders importing South American corn, and the widely assumed low protein nature of the hard red winter (HRW) wheat crop has fostered ideas that HRW will likely supplant corn in many Southern Plains feedlots. However, in the areas that look to be short corn, such as the Eastern Corn Belt, the basis continues to rise as end users scramble to buy corn. I heard mention of an Indiana ethanol plant paying over $5.00 cash on Wednesday at a basis of 58 over July. Mexico's Senate has ruled overwhelmingly in favor of the new USMCA trade agreement. Canada is expected to do the same. Heavy rains are expected to further curtail any late planting efforts on corn for the next 4 to 5 days, but a pattern change then turns things much warmer and drier. Funds, who had done an about face and are now long are thought to be holding a long of 125,000 contracts to begin Thursday. So far, old resistance of $4.38 on July and $4.52 to $4.54 on December are holding the break. Corn export sales for the week ended June 13, were 1.5 million bushels for 2018-19, and 14.2 mb for 2019-20. Shipments of 25.2 mb were below the 38.4 mb weekly needed to reach USDA's 2.2 bb forecast. Total commitments of 1.407 bb are down 14% versus a year ago. DTN's National Corn Index closed at $4.21 on Wednesday with an average basis of 20 cents under July. Under the daily reporting system Thursday morning USDA reported export sales of 122,000 metric tons of corn for delivery to Mexico. Of the total, 52,000 metric tons is for delivery during the 2018/2019 marketing year and 70,000 metric tons for delivery during the 2019/2020 marketing year.

Soybeans:

Soybeans are only slightly lower to begin Thursday morning; new-crop November remains $1.15 above the lows set in mid-May. Planting delays and possible detrimental soy yield impacts are now the focus of trade. While a few weeks ago, the trade assumed corn would be switched to bean acres in many areas, now analysts are pegging soybean prevented planting acres to be possibly 1.5 million to 2 million acres. As of Sunday over 19 million acres of intended soy planting remained. A week from now the much anticipated meeting at the G-20 will occur between President Donald Trump and President Xi Jinping. Though a final resolution is not expected, the trade would like to see trade representatives agree to go back to the table. U.S. soy demand continues to suffer and China still has some 6.3 mmt (231 mb) of unshipped soybeans on the books. Funds, who have fueled the recent rally, remain short an estimated 60,000 to 70,000 contracts of soybeans, and if they were to cover, we could move higher even in the face of huge ending stocks and world record supply. However, overall the soybean balance sheet continues to look bearish. Heavy rains look to slow soy planting progress over the next several days, but next week promises a big shift to warmer and drier, with even some forecasts of excess heat talked about. November beans should have modest support in the $9.10-$9.20 area but major overhead resistance at $9.40-$9.50. Soybean sales for the week ended June 13 were 21 mb for 2018-19. Shipments of 27.1 mb were under the 30.5 mb needed each week to reach 1.7 bb. Total commitments of 1.746 bb are down 16% from a year ago. DTN's National Soybean Index closed at $8.27 and reflects an average basis of 76 cents under July. Under the daily reporting system Thursday morning USDA reported export sales of 189,000 metric tons of soybeans for delivery to unknown destinations. Of the total, 126,000 metric tons is for delivery during the 2018/2019 marketing year and 63,000 metric tons for delivery during the 2019/2020 marketing year.

Wheat:

Wheat is under pressure again Thursday morning as the U.S. has priced itself out of world markets following the $1.30 rally from the May lows. Egypt's GASC on Wednesday night bought 290,000 mt of wheat -- 110,000 mt from Russia and 180,000 mt from Romania -- as the U.S. failed to put forth an offer. There were in total 15 offers to Egypt, a good sign of the aggressiveness of U.S. export competitors. The traded values are said to be $30/mt cheaper than U.S. wheat on an FOB basis. U.S. Gulf wheat is priced from $24 to $34/mt above Black Sea wheat. While rains are expected to continue to interrupt U.S. HRW harvest, next week promises a big pattern change to warm or even hot and dry. Early reports, with just 8% of HRW harvest done, are showing some big and possibly record yields in parts of Texas, Oklahoma and southern Kansas. Along with the impressive yields, indications are that protein could be 1% lower than normal. Funds remain short a modest position in Chicago wheat. Spring wheat conditions are well above average early in the growing season, with both Minnesota and North Dakota on Sunday rated at from 83 to 86% good to excellent, with the overall rating at 77% good to excellent. As in soybeans, the overall balance sheet on wheat remains bearish both here and in the world, where a record ending-stocks number projects fierce competition again for U.S. wheat exports. U.S. wheat export sales last week were 6.9 mb for 2019-20. Shipments of 15.8 mb were under the 16.6 mb needed to achieve the USDA projection of 900 mb. Total wheat commitments of 233 mb are up 27% for the year. DTN's National HRW Index closed at $4.39 and the average basis is at 19 cents under July.

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

Follow him on Twitter @Mantini_r

(CZ)

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