DTN Early Word Grains

By Darin Newsom
DTN Senior Analyst

6:00 a.m. CME Globex:

July corn was fractionally higher, July soybeans were 5 cents higher, and July Kansas City (HRW) wheat was fractionally lower.

CME Globex Recap:

The commodity sector had turned around, at least partially from Monday's action early Tuesday morning. Soybeans erased a small part of Monday's loss overnight, rallying 4 cents, while corn was unchanged instead of down. Wheat remained under pressure, due in part to the continued strength of the U.S. dollar. Metals were lower again, although energies decided to take back some of Monday's gains. The same could be said for DJIA futures.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 94.81 points higher (0.4%) at 24,357.32, the Nasdaq Composite gained 55.60 points (0.7%) to 7,265.21, and the S&P 500 added 9.21 points (0.3%) to 2,672.63 Monday. DJIA futures were 40 points lower early Tuesday morning. Asian markets closed higher with Japan's Nikkei 225 up 41.53 points (0.2%), Hong Kong's Hang Seng gaining 408.55 points (1.4%), and China's Shanghai Composite rallying 24.85 points (0.8%). European markets were trading mostly lower with London's FTSE 100 up 6.54 points, Germany's DAX falling 70.83 points (0.6%), and France's CAC 40 down 25.04 points (0.5%). The euro was 0.0043 lower at 1.1880 as the U.S. dollar index gained 0.27 to 93.04. June 30-year T-Bonds were 3/32 lower at 143'15 while June gold dropped $4.10 to $1,310.00. Crude oil was $0.83 lower at $69.90 while Brent crude fell $0.65 to $75.52. China's Dalian soybean futures were lower and Malaysian palm oil futures were mostly lower overnight.

	BULL		BEAR
1)	Export demand remains strong for U.S. corn, with Monday's weekly export inspection report confirming last week's stronger national average basis.	1)	Corn contracts have moved into minor (short-term) downtrends, with July falling below initial technical price support.
2)	July soybeans held minor (short-term) technical price support on its daily chart, sparking early Turnaround Tuesday activity.	2)	Commercial selling continues to pressure old-crop soybeans, indicated by the strengthening carry in the July-to-August futures spread.
3)	The weather remains a bullish factor for winter wheat as it continues to stress the HRW crop across the U.S. Southern Plains.	3)	New-crop winter wheat contracts are in minor (short-term) downtrends on their respective daily charts.

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MORE COMMODITY-SPECIFIC COMMENTS

CORN From a technical point of view, both old-crop July and new-crop December established minor (short-term) downtrends on their respective daily charts during Monday's sell-off. July moved through initial support at $4.01, extending its loss to $3.99 1/4 overnight before rallying through early Tuesday morning. Next support is down at $3.96 1/2. Meanwhile, December continues to hold above its initial support at $4.12 1/2. Fundamentally, Monday saw another strong weekly export inspection number for the week ending May 3. This confirms the basis strength last week, where the DTN National Corn Index gained 3 cents on the July futures contract (from Friday to Friday). The concern now is the strengthening downtrend seen in both the old-crop July-to-September and new-crop December-to-March futures spreads, indicating an increasingly bearish commercial outlook. Early Tuesday could see corn supported by light spillover buying from soybeans, though this could evaporate before the end of the day. Delivery of 314 contracts was reported against the May issue, putting the total at 2,416 contracts.

SOYBEANS The old-crop July soybean contract gained back almost 5 cents of Monday's 25-cent sell-off overnight. From a technical point of view, July beans have tested support at $10.13 on its daily chart, while stochastics are nearing the oversold level of 20%. The key to that last statement is "nearing," meaning the contract may have to move lower still to pull stochastics into oversold territory. If so, next support is at $9.94 3/4, support that was last tested with the spike low of $9.94 1/2 on April 4. Fundamentally, there is some continued concern regarding old-crop soybeans, reflected by the slowly strengthening carry in the July-to-August futures spread. Monday's export inspection numbers (for the week ending May 3) were not spectacular. Also, heavy commercial selling was seen in soybean meal during Monday's breakdown. Bean meal also stabilized overnight. Delivery of 68 contracts was reported against the May issue, putting the total at 970 contracts.

WHEAT As this analysis was being written, Chicago wheat ticked into the green. This officially made early Tuesday morning a turnaround, in part, from Monday's sharp sell-off. Kansas City soon followed suit, with new-crop July moving from fractionally lower to fractionally higher shortly after the 5:30 am (CT) bell rang. Technically, both July Chicago and Kansas City look to be in minor (short-term) downtrends, although the K.C. contract has held support at $5.33 1/4 for now. The condition of the crop remains a huge question mark, with temperatures across the U.S. Southern Plains soaring into the 90's this week with little rain in sight. There were no new deliveries reported against the May Kansas City issue, keeping its total at 862 contracts. There continues to be no deliveries reported against the May Chicago issue.

	DTN Cash	Change From	National	Contract	Change from
Commodity	Index	Prev Day	Avg. Basis	Month	Prev Day
Corn:	$3.65	-$0.05	-$0.36	Jul	$0.001
Soybeans:	$9.40	-$0.24	-$0.72	Jul	$0.010
SRW Wheat:	$4.79	-$0.14	-$0.32	Jul	$0.005
HRW Wheat:	$4.95	-$0.15	-$0.45	Jul	$0.011
HRS Wheat:	$5.99	-$0.12	-$0.12	Jul	$0.005

Darin Newsom can be reached at darin.newsom@dtn.com

Darin can be followed throughout the day at www.twitter.com\DarinNewsom

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