DTN Before The Bell Grains

Morning CME Globex Update:

Following Friday's 44-point decline, Dow Jones futures are 81 points lower early on Monday. August crude oil is down 12 cents per barrel, the U.S. dollar index is up .1040 and August gold is up $6.40 an ounce.

Other Markets:

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

Corn:

Corn gapped higher in Sunday's overnight trade following sharp gains on Friday. Weekend forecasts project a warm to hot and much drier pattern ahead for the next 10 to 15 days. While the heat is something late-planted corn sorely needs to accelerate growth and maturity, it is the extent of the warm and dry spell that has farmers concerned for shallow-rooted corn in many areas. With December corn currently trading up around $4.46, there is significant resistance above at $4.49-$4.53. While future corn supply is certainly in jeopardy, it is demand that continues to diminish, with cheaper South American and Black Sea values stealing export business. With last week's export sales at a paltry 6.9 million bushels (mb), total commitments of 1.926 billion bushels (bb) are down 15% from last year's 2.271 bb with nine weeks left. It is very likely USDA may be overstating U.S. corn exports by as much as 50 mb to 150 mb. Export sales, for the fifth consecutive week, failed to meet the weekly amount needed to achieve USDA's projected total. Thursday will feature the all-important USDA supply and demand report, and, using the just revised larger acreage estimate, is likely to show a corn stocks number of 1.8 bb to 1.9 bb -- far above what many private analysts are penciling in, with only guesses as to prevented planting and abandoned acres. Although many analysts see much lower yields and production than USDA is likely to report, the report is expected to be bearish. Various media sources have described parts of the Eastern Corn Belt a disaster. The Eastern Corn Belt basis continues to reflect that, with Ohio basis from $0.40 to $0.60 over futures. A rally and close over $4.53 to $4.54 on December could lead to new highs in corn, while the $4.20 gap area will continue to provide support. DTN's National Corn Index closed at $4.24 on Friday, with an average basis of 14 cents under September.

Soybeans:

While soybeans are slightly higher on the warmer and drier forecast, expectations for improved soy conditions and a 95% to 97% planting pace in Monday's crop progress report, and an overwhelming bearish supply and demand picture, continue to weigh on soybeans. U.S. and China trade representatives are scheduled to renew negotiations on trade this week, but pessimism for a final resolution runs high. Demand for soybeans continues to leave much to be desired. Export sales for last week were decent at 31.9 mb, and total commitments of 1.783 bb are encouraging, it is the shipment pace that is concerning. China is said to still have 212 mb of unshipped sales with only nine weeks left in the crop year. African swine fever continues to expand with a 144th case found over the weekend in China. The warmer and drier outlook for the next few weeks is not as concerning for soybeans, with the delayed start, as August weather is deemed more important for yields. Expectations are for Monday's crop progress report to show soy conditions up 1% to 2% in good to excellent from the prior week. U.S. soy complex demand continues to be challenged by South America, with South Korea over the weekend picking up 180,000 tons of soybean meal for December arrival, all thought to be of South American origin. Funds do remain net short an estimated 80,000 contracts of soybeans -- perhaps a positive with any bullish news. However, USDA is not expected to lower soybean yield on Thursday, and many in the trade see soybean acres could ultimately be higher than what USDA revealed at the end of June. November soybeans appear caught in a range of $8.90 to $9.30. A break and close under $8.85 is likely to lead to another leg lower, while significant resistance exists up around $9.20-$9.40. DTN's National Soybean Index closed at $8.02, reflecting an average basis of 74 cents under August.

Wheat:

While there were rain delays in parts of Kansas over the weekend, harvest is progressing. Yield continues to impress, with reports of yield as high as 80 bushels per acre. Protein continues to run perhaps a percent below a year ago at close to 11%. Harvest is estimated to be 45% done as of Sunday and will be revealed on Monday's crop progress report. Good rains over the weekend moved across the spring wheat belt and more are slated to fall this week. Conditions on spring wheat are likely to improve from the already favorable 75% good-to-excellent reading of last week. There are some trouble spots overseas, with the hot and dry weather in both the EU and Black Sea wheat areas clipping yield potential. Sov Econ, a Russian consultancy, dropped that wheat crop to 76.6 million metric tons (mmt), compared to USDA's 78 mmt and private estimates above 80 mmt, and they dropped Russian wheat exports to just 33 mmt versus 37.6 mmt earlier. However, there is no shortage of wheat, with combined U.S., EU and Black Sea wheat production expected to be close to 29 mmt (1.065 bb) higher this year. The Ukraine, according to French crop consultant Agritel, will have record wheat yields and production of 28.8 mmt -- a 17% gain over last year. U.S. wheat exports in this new-crop year continue to be a bright spot with 265 mb sold so far versus just 220 mb a year ago. This is a bit of a surprise as U.S. wheat continues to miss business, with both Tunisia and Algeria late last week buying French wheat; both U.S. soft red and hard winter wheat are overpriced. DTN's National HRW Index closed at $4.24, 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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