DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are up 60 points early on Monday. August crude oil is up 74 cents per barrel, the U.S. dollar index is up .1380 and August gold is down $.40 an ounce.

Other Markets:

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

Corn:

Corn is lower to begin Monday; for the third straight trading session December futures have stopped at or near $4.28. Ultimately, a break through and close under that level would be bearish. Even more so would be a close below the unfilled gap at $4.20. Many Midwest areas received some rain over the weekend except for Illinois, which was shortchanged and needs rain soon. Monday morning it appears some light showers are moving into a wide path in Illinois from Missouri. The good news is temperatures have cooled down and expect to remain that way through most of the week, with the 8- to 14-day portion of the forecast promising warmer temps but more moisture ahead of widespread pollination. Friday's Commitment of Traders report showed managed funds, as of last Tuesday, were still net long a hefty 187,000 contracts of corn. Cattle on Feed on Friday revealed a July 1 on feed total that was the largest on record for this time of year. Export demand is scarce for U.S. corn, as cheaper South American and Ukrainian corn satisfies much of the demand. South Korea's KOCOPIA bought 55,000 mt of optional corn for October shipment. European heat and dryness is taking a toll on that corn crop, however, some soaking rains may occur later this week. U.S. corn conditions are expected to gain 1% to 2% in the good-to-excellent category when crop progress and conditions are reported Monday afternoon. While many corn analysts, farmers and traders feel both yield and final acreage will ultimately fall following the excess wetness in the spring, the corn market is close to changing the trend to bearish again. The short-term moving average (20 day) is threatening to break under the 50-day average. DTN's National Corn Index closed at $4.23 on Thursday, with an average basis of 8 cents under September.

Soybeans:

Following sharp gains on Friday linked to chatter about new Chinese buying, beans began Monday on the defensive, 1-2 cents lower. According to China's Xinhua news agency some Chinese firms were once again seeking to purchase U.S. ag goods on Friday. There were rumors of China getting ready to buy large quantities of U.S. grain, and were inquiring about U.S. soybeans for September-October off the PNW. Perhaps there is some truth as bids at the PNW for beans were said to be up 15-20 cents per bushel. The strange part is that China still has close to 190 million bushels of unshipped bean sales on the books with just six weeks remaining in the crop year. There is talk that trade discussions are moving in the right direction, but we have heard that many times before. Managed funds remain net short on soybeans -- 38,000 contracts as of last Tuesday -- but likely covered some of that on Friday's 20-cent rally. As in corn, soybean conditions are expected to remain stable or even gain 1% to 2% in the good-to-excellent category when Monday's crop progress report is released. November soybeans should continue to face some stiff selling in the $9.25 to $9.35 area, while support on a break is at $8.95 to $9.00. A break and close under $8.85 to $8.90 would be a bearish omen. Large world soybean supplies and slack demand from the world's #1 importer (China) will continue to pressure the bean market. DTN's National Soybean Index closed at $8.32, reflecting an average basis of 70 cents under August.

Wheat:

All three wheat markets began Monday with slight losses. The advancing harvest, slack demand, stiff competition and rising U.S. production ideas are weighing on wheat. In both Kansas City and Minneapolis, short-term moving averages have crossed over longer-term averages -- typically a trend change indicator. Chicago wheat is a bit more solid, but remains trading below the 50-day average. The EU and Black Sea exporters continue to be very aggressive with wheat offers. Russian Consultant IKAR lowered Russian wheat production to 76.1 million metric tons (mmt) from 77.4 mmt and reduced Russian wheat exports by 1 mmt to 33.2 mmt. However, Ukraine is on pace to have a wheat crop that is 27.5 mmt compared to 24.6 mmt last year, and Argentina's wheat plantings are record large. U.S. spring wheat conditions are expected to show improvement in Monday's crop progress report following plentiful rains in the past week. Minnesota and North Dakota were already rated from 80% to 85% good to excellent. Winter wheat harvest is likely to be 75% complete as of Sunday, and harvest is advancing into Colorado and Nebraska. Managed funds as of last Tuesday were still net long 18,000 contracts of Chicago wheat, and in Minneapolis, funds are net short a modest, but record large, 13,000 contracts as of last Tuesday. Kansas City September wheat has been able to stay above $4.30, but a fall under that level will be bearish. A key area to watch on Chicago September is $4.90. DTN's National HRW Index closed at $4.18, 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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