DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are up 100 points early on Tuesday. August crude oil is down 16 cents per barrel, the U.S. dollar index is up .2950 and August gold is down $.70 an ounce.

Other Markets:

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

Corn:

Corn is up one cent per bushel in a mini-correction following Monday's plunge in grain and soybean prices. Weekend rains that were better than expected and a cooler pattern as we begin the majority of corn pollination encouraged long noncommercials to liquidate long positions. Managed funds are thought to have sold 10,000 contracts on Monday, but still remain long a hefty 120,000 corn contracts to begin Tuesday. December corn has now breached the 50-day moving average with the 20-day average about to cross over to the downside -- a bearish omen. The open chart gap at $4.20 will be the target for bears if we resume the move lower. Corn conditions, reported on Monday's crop progress report, were down 1% at 57% good to excellent and still the lowest rating since 2012. The trade had estimated conditions might improve by a percent or two. Silking was 31% behind the average pace at 35%, and the majority of pollination looks to occur over the next two weeks. The condition rating compares to 72% last year at this time. Corn inspections continue to lag last year by 12%, with last week's inspections of just 17.2 million bushels (mb) well under the weekly pace needed to achieve USDA's projection. It is very likely in the August report USDA will be inclined to lower U.S. corn exports by 50 mb to 75 mb. However, the trade is expecting both acreage and yield to fall on the August report. U.S. corn has been over priced to major competitors. Witness Monday's South Korea purchase of optional corn at $221.25/metric ton (mt) landed versus U.S. corn that would be closer to $235/mt. The U.S. sorghum crop is rated 73% good to excellent, and that compares to 49% last year at this time, and it is likely production will be raised, bringing yet more competition to corn in the feed arena. Weather on Tuesday looks dry over much of the Corn Belt and temperatures are beneficially cooler. The 6- to 14-day portion of the forecast warms back up a bit, but is also wetter. Look for $4.20 on December to hold a break, with a fall below that leading to challenge of major support at $4.00-$4.06. December's fall under $4.28 was a bearish omen. DTN's National Corn Index closed at $4.15 on Monday, with an average basis of 7 cents under September.

Soybeans:

Soybeans, which had been surprisingly strong recently on rumors of China interest in U.S. beans, fell hard on Monday and are selling off again to begin Tuesday. Rumors of China interest have not been verified, and it is unlikely China would take any more old-crop soybeans, with nearly 190 mb of unshipped sales still on the books. Chinese newspapers are reporting some firms in China have petitioned for a tariff waiver in an attempt to buy more U.S. products, with some media sources suggesting China is seeking U.S. corn, soybeans, sorghum, cotton and pork. Soybean conditions remained unchanged and historically poor, at 54% good to excellent, with Eastern Corn Belt states the worst. Illinois, at just 45% good to excellent, compares to 78% a year ago, and is one of the worst rated states. Forty percent of the soybean crop is blooming versus an average of 66%, and just 7% are setting pods. Soybean export inspections continue to falter, with just 20.6 mb inspected last week and the total remains some 24% below a year ago. There is a very good chance some unshipped sales will be rolled forward with just six weeks left in the crop year. Funds remain short soybeans to the tune of about 60,000 contracts. November soybeans are just a few cents from the 50-day average of $8.99 and a fall below the $8.85 to $8.90 area will likely lead to a larger break. U.S.-China trade talks have resumed and U.S. negotiators are said to have a face-to-face meeting scheduled for next week, but time is running out for old crop soy. In addition, African swine fever remains uncontained, with the disease now starting to appear in parts of central and Eastern Europe as well as Asia. DTN's National Soybean Index closed at $8.19, reflecting an average basis of 69 cents under August.

Wheat:

All three wheat markets are up 3 to 3 1/2 cents to begin Tuesday following Monday's surprising freefall. As winter wheat harvest is now 69% done, and looks to finish up uninterrupted with mostly dry weather, yields suggest a larger crop than many had thought a month ago. Spring wheat conditions at 76% good to excellent were unchanged on the surface, but 3% moved from good to excellent, and major producers Minnesota and North Dakota remain 80% to 85% good to excellent. The Wheat Quality Council spring wheat tour begins Tuesday morning, with mostly glowing reports expected. There is potential for more disease issues following weeks of plentiful rain. As in corn, U.S. wheat is overvalued to other major competitors, with the EU and Black Sea aggressively looking for homes for their wheat, as the world is expected to have a record large supply. EU and Black Sea wheat is offered at $195 to $197/mt on an FOB basis compared to U.S. soft red (SRW) at $210/mt and U.S. hard red (HRW) at $210/mt. The good news is U.S. wheat inspections to date are 125 mb compared to just 98 mb last year -- up 28%. Taiwan flour millers did buy 90,000 mt of U.S. mixed wheat for September-October. Egypt is in for wheat for Aug. 25 to Sept. 5, and the U.S. is said to be significantly higher than Black Sea offers. Egypt, in their last tender, bought just one cargo (2.2 mb) of Russian wheat. The wheat markets in Chicago and Kansas City are getting very oversold, but there is not a lot of positive news to drive markets higher. Look for a solid close under $4.30 on KC September and $4.90 on Chicago September to lead to more weakness. DTN's National HRW Index closed at $4.07, 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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