DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are showing 56 points higher early Wednesday. August crude oil is up 45 cents per barrel, the U.S. dollar index is down .0040 and August gold is up $12.80 an ounce.

Other Markets:

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

Corn:

For the second consecutive day, December corn stopped just short of the open chart gap at $4.20, which coincides with the 50-day moving average. Corn is bouncing to begin Wednesday morning ahead of the Fourth of July holiday. After a shortened day Wednesday, markets will close until Friday morning. Corn has been pressured by not only the plummeting wheat market, but also short demand, as both Ukraine and South American values are markedly cheaper than U.S. corn on an FOB basis. U.S. corn exports continue to run well below a year ago and analysts look for USDA to adjust corn exports downward ultimately by possibly 100 million to 150 million bushels (mb), leading to large carry in stocks. Underpinning corn futures this morning is talk from USDA that prevented planting acres could be over 10 million and claims could be over $1 billion. In addition, large corn deliveries against the expiring July futures are being stopped by commercials. The corn basis in the Eastern Corn Belt remains very firm with values of as much as 60 over spot futures in Ohio, and even 45 over for new crop as end users scramble to secure supplies from farmers who have little interest in selling after a 50-cent break from the highs. Funds who had built a sizable net long in corn are now thought to be long a more manageable 60,000 contracts to begin Wednesday. Weather features a cooling trend beyond Thursday and a nice mix of rain and sunshine over the next week; through July, at this point, near normal rain and temperatures are projected. Crop conditions, reported to be the worst since 2012, are likely improving following the sunshine and heat of the last week, but questions still remain regarding acreage and yield impacts of the unprecedented spring season. Look for the $4.20 area to support December corn again with a fall below likely to test major support at $4.03 to $4.06. DTN's National Corn Index closed at $4.03 on Tuesday, with an average basis of 17 cents under September.

Soybeans:

Soybeans are bouncing a bit early Wednesday following a 30-cent per bushel break on November beans from the high made Monday. The euphoria from the U.S. decision to not impose more tariffs on China and the renewed trade talks did not last long, but rumors of China making some big U.S. energy purchases and rumors of Chinese interest in PNW beans are supportive to begin Wednesday. U.S. soybeans without the tariff are said to work into China at a nice discount to Brazilian beans, but demand for U.S. beans has otherwise been stagnant. There is more talk that African swine fever may have affected Chinese soy demand way more than earlier indications and efforts to stem the impact of swine fever are evident with China's push toward larger pig farms; reducing small farms is one way to monitor the spread of the disease better. Funds, who had covered much of their net soybean short, still remain short an estimated 80,000 contracts. November soybeans on Tuesday broke down below the 100-day moving average and futures look poised to test the next support area of $8.85 to $8.90. A break and close below $8.85 is likely to lead to another leg down in new-crop beans. The jury is still out on final acres and yield, but conditions likely to be reported next Monday should be much better than the 54% good-to-excellent reading this week. The large U.S. and world supply of soybeans should continue to overhang this market at least until we get a better reading on acres. There appears to be no threatening weather for the next few weeks. DTN's National Soybean Index closed at $8.04, reflecting an average basis of 75 cents under August.

Wheat:

With mostly open harvest weather and winter wheat yields so far exceeding expectations, wheat has been on a downward slide. Kansas City September wheat had fallen 61 cents per bushel in four trading days, but to begin Wednesday is a bit higher. The impressive hard red winter wheat (HRW) yields so far have many analysts thinking HRW production could be more on the order of 875 mb to 900 mb rather than the 794 mb USDA estimated. Wheat pressure has also come from the reeling corn market, as the USDA acreage report, if close to being correct, would certainly lessen the need for wheat to work into feed rations. Hedge pressure comes from the expanding harvest and much cheaper major competitor wheat offers. U.S. soft red (SRW) wheat is said to be a $35/mt premium to other offers on a FOB basis, and even U.S. HRW is overpriced to Russian and German hard wheat. Egypt's GASC tender resulted in the purchase of only 60,000 metric tons (mt) (2.2 mb) of wheat from Romania, with the huge offer of 900,000 mt on that tender a signal that the world has plentiful wheat supplies looking for a home. Also bearish for wheat are the storms currently moving across the Northern Plains, following the recent dry pattern. Spring wheat conditions, at 75% good to excellent as of Monday suggest higher overall production there. While Kansas City September wheat is getting a bit oversold, it looks to be headed for a test of $4.20-$4.25. DTN's National HRW Index closed at $4.11, and the average basis is at 22 cents under September.

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

Follow him on Twitter @Mantini_r

(CZ)

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