DTN Before The Bell Grains

Morning CME Globex Update:

Following Tuesday's drop of 179 points, Dow futures are 54 points higher early on Wednesday. August crude oil is up $1.11 per barrel, the U.S. dollar index is up 0.0790 and August gold is down $3.90 an ounce.

Other Markets:

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

Corn:

Corn is lower to begin Wednesday, and although the two week forecast promises a much more beneficial warmer and drier pattern for much of the central U.S., there are storms rolling through eastern Nebraska and Kansas this morning. With the St. Louis harbor closed down, spot basis at the Gulf has firmed up, with spot corn said to have traded as high as 95 over the July futures. Interior basis, especially in the Eastern Corn Belt, continues to be very firm in anticipation of a future shortage and farmers holding tight to stocks, as end users look for coverage. It is hard to talk about shortage based on an old crop carryout that is expected to be close to 2.3 billion bushels (bb), but the market seems to be factoring in an ultimate new crop loss of anywhere from 1.5 to 2.2 bb. We will likely not know until sometime in August. While Friday's USDA stocks and seeding report is expected to give us June 1 corn stocks even higher than last year's 5.3 bb, predicting acreage will be a tougher task. The trade is projecting an acreage number of 87 million according to a Dow Jones survey, in a range of 84.3 to 88.8 million acres. Analysts consider a fall below 88 million acres to be bullish to corn prices. Demand for U.S. corn has suffered at the hands of cheaper competitor offers after the big run-up in prices, and it is likely that another 100 to 150 million bushels (mb) could be cut from the export forecast. Although the market feels a bit heavy ahead of the more favorable weather outlook, there is plenty of volatility and uncertainty ahead, with the majority of the corn crop now expected to pollinate in late July and even early August during the summer heat. Look for December corn to find support in the old resistance range of $4.52-$4.54, but a solid close under that would likely be bearish. DTN's National Corn Index closed at $4.31 on Tuesday, with an average basis of 17 cents under July.

Soybeans:

Soybeans are lower as November beans once again challenged the major resistance area of $9.40 to $9.50 for about the 7th time, and each time has failed to bust through. Some positive news this morning is a report the U.S. is set to delay any additional tariffs on China as trade negotiations resume, according to Bloomberg. Presidents Trump and Xi Jinping are scheduled to meet in Japan on Saturday at the G-20 summit. Treasury Secretary Steve Mnuchin on a CNBC interview said that he is optimistic that a U.S.-China deal could be reached by year end. Where have we heard that before? Mnuchin says negotiators are 90% there. Delayed soy seeding, 85% complete as of Sunday, is likely to get a boost this week with mostly warmer and drier weather, but contrary to the early planting period, when it was likely that bean acreage could increase on switches from corn, the trade is now talking of sizeable prevented planting acres on beans as well. There have also been projections of a fall in yield as well. However, the overall U.S. and world soybean market is still well-supplied and can easily withstand some losses. While Friday's acreage report is not expected to have big changes (an average trade estimate of 84.5 million acres in a range of 83 to 86.5 according to Dow Jones), stocks are certain to be at a record high as of June 1. U.S. exports continue to suffer as Brazil meets China's needs. African swine fever continues to clip Chinese demand with Brazil's share of China's May soy imports, at 6.3 million metric tons (mmt), down 2.8 mmt from a year ago in May. Look for November beans to continue to be challenged by that resistance area, while support must hold at $9.10 to $9.15 or risk breaking down. Perhaps the most positive thing about the bean market is that noncommercials are still net-short. DTN's National Soybean Index closed at $8.29 and reflects an average basis of 75 cents under July. At 8 a.m.USDA reported 145,000 mt of soybeans sold to unknown destinations for delivery in 2018-2019.

Wheat:

Wheat is lower to begin in both Chicago and Kansas City on Wednesday, with Kansas City September futures now nearly 35 cents below the high set in early June. The market must hold support at $4.60 to $4.62 on September or risk breaking down. Although conditions fell in both winter and spring wheat in Monday's crop progress report, they both remain well above recent years. Weather over the next few weeks is conducive to a rapid harvest in winter wheat, and is beneficial for spring wheat. As in soybeans, the wheat market fundamentals remain mostly bearish. Managed money funds are thought to have covered much of their speculative short in wheat, with estimates of the Chicago short just 19,000 contracts to start Wednesday. A ridge of high pressure is expected over the southern wheat areas, which should allow a pick-up in harvesting. Chicago wheat is firmer than Kansas City on ideas that not only quality but quantity of soft red winter (SRW) is likely to be compromised following a spring of extreme wetness and flooding. SRW is already expected to be tight. DTN's National HRW index closed at $4.48 and the average basis is 17 cents under July.

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

Follow him on Twitter @Mantini_r

(CZ)

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