DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are showing 13 points lower early Thursday. August crude oil is down 41 cents per barrel, the U.S. dollar index is up 0.0790 and August gold is down $11.30 an ounce.

Other Markets:

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

Corn:

Corn is little changed to begin Thursday ahead of what promises to be a very volatile Friday. Friday is not only the day of the much anticipated USDA June stocks and seeding report, but also end of the quarter, first notice day for July futures delivery, and the day when Presidents Trump and Xi Jinping from China are expected to begin their meeting on U.S.-China trade relations. Although traders will be reluctant to use Friday's acreage number as final, it is expected to give the market a much better idea of what the late planting and water-logged spring has meant to planting decisions. The average trade estimate, according to the Dow Jones survey, hints at a further drop of 2.8 million acres, giving us a total 5.8 million acre drop from March intentions of 92.8 million acres. Some analysts hint at an even higher final drop, which will likely not be known until fall. Tight holding by farmers and fears of corn shortages, especially in the very late Eastern Corn Belt, has led to a surge in interior basis, while the Gulf corn basis has also traded at very high levels due to river closures. There is also a fear that the late planted corn crops and lack of maturity in new crop corn could result in low test weight and possibly more foreign material. Some buyers have instituted a guaranteed #2 yellow corn policy, with sharp discounts for #3 YC, according to various commission houses. While acreage is expected to be much lower, June 1 stocks are likely to show an even larger number than last year, as U.S. corn exports have sagged with cheaper competitors and substitutions. USDA could trim feed use and/or exports even more in future reports. Feed wheat is making strides in cutting into corn business, with the latest purchase by the Philippines of 95,000 metric tons (mt) of feed wheat from the Black Sea. Weather today features light to moderate rains in the Northern Plains, but most of the rest of the U.S. is warmer and drier, and is expecting another 7 to 8 days of such beneficial weather. Funds are unlikely to have a net-long of about 80,000 contracts still after selling 15,000 on Thursday. Look for the $4.52-$4.54 range on December futures to be key. A solid close under that will be construed as bearish. Corn export sales for the week ending June 20 were 11.6 million bushels (mb) for 2018-19. Shipments of 27.4 mb were less than the 39.6 mb needed each week to reach 2.2 billion bushels (bb). Total commitments of 1.919 bb are down 15% versus a year ago, bearish. DTN's National Corn Index closed at $4.28 on Tuesday, with an average basis of 16 cents under July.

Soybeans:

Soybeans are up slightly to begin Thursday after falling Wednesday. November soybeans have been rebuffed now seven times at the $9.40 to $9.50 range and will need to stay above $9.10 or risk breaking down. Weather ahead is mostly clear and warmer, beneficial to finishing planting and for crop growth. While most in the trade are expecting soybean acreage to be down a bit on Friday's USDA report, some analysts have hinted at 1 to 2 million acres of prevented planting in soybeans ultimately. Ag Resource is one of the few that I've seen who still see a gain in soybean acres from March intentions, pegging acreage at 85.5 million. While acreage and yield impacts on late planting are very much up in the air, that is unlikely to be the case on June 1 stocks, which everyone expects could be record high. Presidents Trump and Xi Jinping are expected to dine tonight in Japan at the G-20 summit, continuing talks on Saturday. While U.S. optimism is said to be high, many are skeptical of a final deal, and rightly so. Funds, who have recently covered some of their once-large soybean short, are believed to be holding net-short north of 80,000 contracts. U.S. soybeans are once again competitive to non-China destinations, but demand has been lacking until Wednesday's announcement of a 145,000 mt sale of U.S. soybeans to unknown. Soybean export sales for 2018-19 for the week ending June 20 were a meager 6.2 mb. Shipments of 26.6 mb were below the 30.8 mb needed to reach 1.7 bb. Total soy commitments of 1.751 bb for 2018-19 are down 16% versus last year, bearish. DTN's National Soybean Index closed at $8.20, and reflects an average basis of 75 cents under July.

Wheat:

Wheat is surprisingly strong Thursday morning, with Chicago wheat surging to a new recent high. Very hot temps recorded in parts of Germany and France are likely impacting wheat there, and Paris milling futures have jumped sharply in the past week. Ahead of delivery, lack of deliverable stocks in Chicago and Toledo, and a surging soft red wheat (SRW) basis have provided fuel to the rally. There is more talk that with cash SRW at 20-25 over futures, we could see hard red winter (HRW) wheat move to Chicago or St. Louis for delivery. Wheat stocks in both the U.S. and the world continue to paint a mostly bearish scenario for wheat, although in the U.S. the premium will be on protein milling quality supplies, as early indications are that excess rains have driven protein down. With an already tight SRW carryout expected, quality SRW could be hard to come by, hence the strength in that market. Agritel revealed their new projection for Russia's wheat crop at 81.7 mmt, up 14% versus last year. Russia's exports are expected to be up 3 mmt to 37 mmt. Stats Canada revealed a Canadian wheat crop that was a little smaller than expected, but Canada should still have plentiful export supplies. Some heavy rains expected in both the U.S. northern Plains and Canadian Prairies, beneficial following the recent dryness. Funds have whittled their once-large net wheat short down to an estimated 15,000 contract short to begin Thursday. Wheat should have a wide open harvesting period ahead, which should cap the current rally. Wheat sales for 2019-20 for the week ending June 20 were 22.5 mb. Shipments of 15.4 mb are below the average of 16.6 mb needed to achieve the USDA projection of 900 mb. Total wheat commitments for 2019-20 are 255 mb, up 25% versus last year, but considered neutral for wheat. DTN's National HRW index closed at $4.52, and the average basis is at 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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