DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are 263 points higher early Monday following the proposed restart of U.S.-China trade talks over the weekend. August crude oil is up $1.58 cents per barrel, the U.S. dollar index is up .2860 and August gold is down $16.70 an ounce.

Other Markets:

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

Corn:

Following the unexpected rise in U.S. corn planted acreage as detailed in Friday's USDA report, corn closed nearly 20 lower to end the week. The weakness continues to begin the week. The National Agricultural Statistics Service (NASS) projected U.S. corn acres at a surprising 91.7 million acres (ma) based on an early June survey. That was roughly 4.7 ma higher than the pre-report average trade estimate of 87 ma and just slightly under the lofty 92.8 ma March intentions. With the unprecedented excess water and flooding in the spring, the trade had expected a much more bullish number and managed funds were caught carrying a long of close to 180,000 contracts as of last Tuesday. Funds began to liquidate those longs and sent the market reeling. While just lower again to begin Monday, the bearish acreage estimate was offset a bit by lower-than-expected June 1 corn stocks at 5.2 billion bushels, along with the implied higher usage, and the positive restart of U.S.-China negotiations following a proposed trade truce from President Donald Trump and President Xi Jinping at the G-20 summit in Japan. Also stopping the bleeding to some extent is the idea that final acres and yield are far from set in stone, with a re-survey by NASS of all corn states in July, and those results likely to show a much different story on the Aug. 12 WASDE report. At the time of the last survey there were an estimated 15.3 ma left to be planted. Many in the trade assume acreage and yield numbers that will be much lower than those revealed recently, and prevented planting acreage will not be fully known until late August. Weather has taken a turn for the better, with warmer and sunnier weather in all but the northern Midwest and Plains likely to propel crop condition ratings higher Monday. U.S. corn, even with the late week break, remains priced some 30 to 50 cents per bushel higher than other major exporting countries. Deliveries of corn on both Friday and Monday morning were heavier than expected and were put out by Cargill, pressuring nearby futures. DTN's National Corn Index closed at $4.06 on Friday with an average basis of 19 cents under September.

Soybeans:

Friday's NASS acreage number for soybeans painted a much different story for soybeans with a much lower-than-expected planted acreage estimate of 80 million acres. This figured to be 4.3 ma below the average trade estimate and 4.6 ma under the March intentions of 84.6 ma. Most in the trade had assumed, with soy planting expected to go through June, acreage would be much higher. This surprise, along with a lower-than-expected June 1 stocks number of 1.79 billion bushels, sent the soy market up on Friday and again early Monday. Also adding to the friendly report news was the weekend G-20 summit in Japan, which saw a mutual trade truce and proposed restart of negotiations by President Donald Trump and President Xi Jinping. President Trump extended a concession of allowing U.S. companies to do business with technology giant Huawei in an effort to reach a deal, but it appears this trade impasse will be kicked down the road again. No further tariffs will be imposed, but those currently in force will remain. U.S. soybean stocks, though lower than expected, were still an all-time record at 1.79 bb, 570 mb above the old record of a year ago. China had surprisingly bought 544,000 mt (20 mb) of U.S. soybeans on Friday, but this was thought to be old business agreed upon, rather than a sign of good faith ahead of the G-20. Unshipped China purchases remain lofty and concerning. Continuing to hang over the soy market are large old-crop stocks, large South American exports and a severe slowdown in Chinese demand. Media stories published over the weekend suggested the toll from African swine fever in China may be twice as high as initially reported, with the 137 reported outbreaks, leading to possibly 50% of China's sows dead due to the disease or precautionary slaughtering. With funds still net short roughly 60,000 contracts to begin the week, November soybeans could once again challenge the strong resistance at $9.40 to $9.50, but certainly, the upside will be capped by overwhelming bearish supplies. DTN's National Soybean Index closed at $8.26 and reflects an average basis of 79 cents under August.

Wheat:

Although Friday's NASS report for wheat held little fanfare, wheat's relation to the corn market was on full display, and beneficial weather ahead allowed wheat harvest to rapidly accelerate, sending prices sharply lower. Wheat ending June 1 stocks of 1.072 billion bushels, although under the 1.1 bb expected, are still burdensome, and with corn acres pegged at much higher-than-expected levels, the need for wheat to be substituted for corn as feed has fallen considerably. It was the increased feed usage of wheat in the March through May quarter than also put June 1 wheat stocks at a lower level than pre-report estimates. Wheat fell nearly 20 cents per bushel following the report, despite the lowest all-wheat acreage of 45.6 ma since 1919! As the winter wheat harvest moves ahead, hard red winter wheat (HRW) yields and quality are impressive, with both much better than the soggy spring would have suggested. Soft red winter wheat does show lower protein and a higher damage count, suggesting good quality SRW will be in short supply. U.S. wheat, in world markets is still overpriced compared to other major exporters, and Russia's decision to keep zero export tariffs will keep their aggressive export stance intact. Both Russia and EU wheat estimates have recently fallen on hot and dry weather, but world wheat supplies will continue to be excessive. DTN's National HRW Index closed at $4.33 and the average basis is at 28 cents under September.

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

Follow him on Twitter @Mantini_r

(CZ)

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