DTN Before The Bell Grains

Morning CME Globex Update:

Following Wednesday's drop of 116 points on the Dow Jones Index, Dow Jones futures are down 42 points early on Thursday. August crude oil is up 21 cents per barrel, the U.S. dollar index is up .0250 and August gold is down $5.10 an ounce.

Other Markets:

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

Corn:

Corn is weaker to begin Thursday despite the well-advertised heat wave occurring across the central U.S. and likely stressing crops. The weakness comes also despite much talk of prevented planting of 7- to 8-million acres, and private corn crop estimates that would fall well below those of USDA. While there are plenty of question marks about the ultimate corn supply for 2019, demand leaves much to be desired, as major competitors have cut into U.S. share. Brazilian corn basis has fallen sharply to near 30 over the nearby futures compared to U.S. values that are 40 cents per bushel higher. International FC Stone raised the safrinha corn crop in Brazil by 1.5 million metric tons (mmt) to 71.7 mmt, bringing the total crop to 99.7 mmt. Other analysts see that crop at 101 mmt to 102 mmt. Argentina's Rosario Exchange raised that country's corn crop to 51 mmt compared to USDA's 50 mmt projection. Ethanol production last week rose to 313 million gallons -- up from 308 million gallons the previous week, while stocks rose 1.6% to 983 million gallons. China's second quarter pork production was off 5.5% to 24.7 mmt, while Chinese pork prices have risen 30% versus last year. Cargill is reported to be shutting down several feed mills in China due to lost demand as the result of African swine fever. Weather features some rains moving across not only the Dakotas, but into parts of Iowa and Minnesota in the last two days, and although a cooler pattern is projected for next week, the 6- to 10- and 8- to 14-day periods feature below normal precipitation for the central U.S. Funds are net long an estimated 139,000 contracts of corn still. Look for December corn to find support near the $4.30-$4.31 area, with a close below $4.30 likely leading to more selling pressure. Corn export sales for the week ended July 11 for 2018-19 were 7.9 million bushels (mb). Shipments of 26.9 mb were below the 30.1 mb needed to reach USDA's 2.100 billion bushels (bb) projection. Total commitments of 1.953 bb are down 16% from a year ago. DTN's National Corn Index closed at $4.28 on Wednesday, with an average basis of 8 cents under September.

Soybeans:

Soybeans are going for their fourth straight down day, pressured by news that U.S.-China trade talks are again not making much progress. As in corn, Brazilian soybean basis is falling as Chinese crushers are reportedly delaying shipments of purchased beans due to poor crush margins and weakening demand. U.S. soybean exports continue to languish, with shipments thus far in 2019 down 24% versus a year ago. Good news is that China has ramped up enforcement of intellectual property rights, a likely positive concession of the trade talks. November soybeans are now sitting right at the 50-day moving average and still in a wide $8.90 to $9.30 range. However, a break and close under the $8.85 to $9.00 area is likely to lead to further weakness. Funds are thought to still be net short just over 60,000 contracts of soybeans. Rumors are floating about regarding prevented planting acres ultimately going to 2 million to 3 million on soybeans. Excess heat over the next 3 days is expected to be followed by a cooler pattern, but rains into the end of July are not expected to be plentiful. Long-range forecasts have August weather beneficially cooler and wetter. Moving averages are suggesting the recent break may not be over, with short-term averages turning down and threatening to cross over the longer-term averages. Soybean export sales for 2018-19 for the week ended July 11 were 4.7 mb. Shipments of 33.4 mb were above the 31.6 mb needed each week to reach USDA's 1.700 bb estimate. Total commitments of 1.788 bb are down 16% on the year. DTN's National Soybean Index closed at $8.13, reflecting an average basis of 69 cents under August.

Wheat:

All three wheat markets are again lower, pressured by ideas that U.S. wheat is overpriced relative to the competition. Despite the recent cut in world wheat production of close to 10 mmt, foreign production will still be up sharply from the previous year, and both European and Black Sea exporters are aggressively marketing crops. Wednesday's Egypt wheat tender for August resulted in Egypt buying just 2.2 mb -- one cargo -- of Russian wheat which figured out to $215.59/mt landed. That compares to U.S. hard red winter (HRW) which would land at close to $240/mt. As the U.S. harvest expands and yields continue to suggest a larger crop than many had expected, basis is starting to fall, with HRW basis down 10 cents on Wednesday. Funds are thought to only have a modest net short of 14,000 contracts in Chicago wheat, but are thought to have a near record short in Minneapolis wheat. Spring wheat production appears to be growing with plentiful rains moving across the Dakotas and Minnesota. Crop conditions on spring wheat are likely to move higher, and are already at lofty levels, with both Minnesota and North Dakota 80% to 85% good to excellent. Chicago September wheat looks to possibly be breaking out of a bear flag chart pattern, suggesting much lower prices ahead, but that is an inexact science, and wheat will be tied to corn. Many expect the corn market to revive the move higher as ultimate acreage and yield declines are finally realized. Wheat export sales for the week of July 11 were 12.8 mb for 2019-20. Shipments last week were 10.5 mb and below the 18.2 mb needed each week to reach USDA's 950 mb projection. Total commitments of 289 mb are up 22% on the year. DTN's National HRW Index closed at $4.20, 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)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.