DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are showing 29 points lower early Tuesday after rising 117 points on Monday. August crude oil is down 82 cents per barrel, the U.S. dollar index is down .0610 and August gold is up $5.50 an ounce.

Other Markets:

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

Corn:

Corn was up a bit early Tuesday on worse-than-expected crop ratings reported Monday afternoon, but has now sold off again. With the trade anticipating a jump of 1% to 3% in the good-to-excellent category, the rating was instead unchanged at just 56%, the lowest reading since 2012; last year was 76%. Emergence was at 94% compared to the average of 99%, with Ohio and Michigan lagging at just 83% and 84% emerged, respectively. While Nebraska and Iowa at 73% and 64% good to excellent are the best readings, the Eastern Corn Belt states of Indiana, Ohio and Indiana, along with Missouri, are in the worst condition, ranging from 29% to 45% good to excellent. Corn futures fell hard again Monday and are now over 50 cents lower than the recent high, as Friday's shockingly large acreage number set the tone for a sell-off with funds heavily long ahead of the USDA report. Slack demand on corn and favorable growing weather combined with the bearish planting report from the National Agricultural Statistics Service (NASS) was enough to send corn reeling. Export inspections on Monday continued the pattern of less-than-needed shipments each week. Last week's exports of just 10.7 million bushels (mb) were well under the 43.7 mb needed to achieve USDA's projection. Total shipment are now 9% below a year ago. U.S. corn continued to be more expensive than that of competitors on world markets. Many in the trade see U.S. exports possibly reduced by 100 mb to 150 mb in coming reports. Managed money traders were estimated to have sold 20,000 corn contracts on Monday, putting them still long over 70,000 and under water. The gap area of $4.20 on December corn held on Monday but a plunge through that level will find the next significant support down around $4.03-$4.06, and that should be major support. Corn deliveries have been very heavy with Cargill putting out corn; the trade questions the reasoning with cash corn said to be above delivery value. Weather promises some decent rain coverage in the central U.S., which should be beneficial over the next 5 days. DTN's National Corn Index closed at $3.99 on Monday, with an average basis of 17 cents under September.

Soybeans:

Soybean futures crashed and burned Monday after a firmer start, with November beans falling 26 cents from the daily highs, resulting in what appears to be a bearish reversal pattern. Despite the bullish acreage report from NASS, showing bean planting at just 80 million acres (ma), the lack of demand, stiff competition from cheaper priced competitors, and the still overwhelmingly bearish soybean balance sheet had sellers return to the market. Soybean conditions remained unchanged at 54% good to excellent, said to be the worst since 2012, with poor/very poor at 11%. Soy planting was 92% complete, leaving an estimated 6.7 ma unplanted as of Sunday. The states with the most acres left to plant are Illinois, Indiana, Ohio and Missouri. Soybean inspections, though decent at 26 mb, resulted in total exports that are 25% below a year ago. Coming into Tuesday, funds were thought to be net short around 70,000 contracts of soybeans. Although the meeting between President Donald Trump and President Xi Jinping was a sort of trade war truce, few in the trade expect China to buy many more soybeans this year, as African swine fever's impact on Chinese hogs is thought to be more devastating than earlier projections. Brazil's June soy exports were 9.07 million metric tons (mmt) compared to 10.84 mmt in May and 10.4 mmt a year ago in June. Monday's futures action resulted in a bearish engulfing bar on the November chart, which could send the market lower to the next support at $8.85-$8.90. Weather over the next few days could see moderate rains over much of the central U.S. -- beneficial for those crops planted, but posing a challenge for the remainder of acres to plant. DTN's National Soybean Index closed at $8.13, reflecting an average basis of 77 cents under August.

Wheat:

Wheat continues to slide lower and Kansas City September futures have now plunged 68 cents from the highs set on June 4, having broken through the 50-day moving average. With favorable weather, winter wheat harvest is making big progress. Yields are called impressive and, in many instances, record large. Some analysts believe, ultimately, hard red winter wheat (HRW) production could approach 900 mb -- well above the last USDA estimate of 794 mb. Harvesting of soft red (SRW) in southern Illinois has revealed a vomitoxin issue, which many had feared with the excess rain and flooding this spring. But yields are called very strong and as high as 90 bushels per acre. Wheat exports so far in the new-crop year have been a pleasant surprise with total shipments now running 28% above year ago levels. However, major export competitor crops and aggressive selling will continue to make U.S. exports challenging with no shortage of wheat supplies in the world. Russia on Monday extended their zero tariff policy out to July 2012, guaranteeing their standing as the largest wheat exporter. As of Monday, U.S. SRW was said to be a $35/mt premium to Russian wheat on an FOB basis. Algeria and Egypt are both in for milling wheat and it is likely the U.S. will lose this business. Egypt bought Russian and Romanian wheat in the last tender. Saudi Arabia also bought 730,000 mt (26.8 mb) of 12.5% protein hard wheat on Monday for September-October, but not sure of origin. In Monday's Crop Progress report, U.S. winter wheat was pegged at 63% good to excellent, up 2% from a week ago, while spring wheat was 75% good to excellent, unchanged from the previous week. Major states North Dakota and Minnesota were a hefty 83% and 81% good to excellent. Kansas City September wheat appears to be headed back down to the $4.25 support area. DTN's National HRW Index closed at $4.23 and the average basis is at 21 cents under September.

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

Follow him on Twitter @Mantini_r

(CZ)

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