DTN Early Word Grains

By Darin Newsom
DTN Senior Analyst

6:00 a.m. CME Globex:

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

CME Globex Recap:

Tuesday was a busy news day with the administration announcing plans to attach RINs to ethanol exports, and allow E15 fuel sales year round, as well as the U.S. pulling out of the Iranian nuclear accord. Markets didn't know how to react, either during Tuesday's session or overnight into Wednesday morning. Corn was near unchanged while crude oil erased the previous day's sharp $2 sell-off with a similar rally overnight. Meanwhile, gold fell despite the perceived global chaos a nuclear Iran could create.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 2.89 points higher at 24,360.21, the Nasdaq Composite gained 1.69 points to 7,266.90, and the S&P 500 lost 0.71 point to 2,671.92 Tuesday. DJIA futures were 120 points higher early Wednesday morning. Asian markets closed mixed with Japan's Nikkei 225 down 99.81 points (0.4%), Hong Kong's Hang Seng up 133.33 points (0.4%), and China's Shanghai Composite off 2.35 points. European markets were trading mostly higher with London's FTSE 100 up 43.93 points (0.6%), Germany's DAX gaining 42.87 points (0.3%), and France's CAC 40 up 4.67 points. The euro was 0.0009 lower at 1.1855 as the U.S. dollar index added 0.09 to 93.18. June 30-year T-Bonds were 26/32 lower at 142'18 while June gold lost $7.10 to $1,310.60. Crude oil was $1.79 higher at $70.85 while Brent crude gained $1.94 to $76.79. China's Dalian soybean and Malaysian palm oil futures were lower overnight.

	BULL		BEAR
1)	One set of arguments is that year-round sales of E15 fuel would be bullish fundamentally for corn.	1)	Another set of arguments states that attaching RINs to ethanol exports would be long-term bearish for the corn market.
2)	Renewed commercial buying was seen in old-crop soybeans Tuesday, hinting at likely announcements of new export sales either Wednesday or Thursday.	2)	The stronger U.S. dollar isn't helping demand for domestic soybean supplies.
3)	July Kansas City (HRW) wheat is testing minor (short-term) technical price support.	3)	July Kansas City (HRW) wheat remains in a minor (short-term) 3-wave downtrend on its daily chart.

The weekly Newsom on the Market column can be found on subscription sites only. On DTN Pro it is in News/Town Hall and on MyDTN in News/Columns.

MORE COMMODITY-SPECIFIC COMMENTS

CORN All of Tuesday's news regarding Renewable Identification Numbers (RINs), ethanol exports, and year-round sales of E15 fuel had little effect on the corn market. Immediately, there were economists pointing out the bearish implications for the corn market while others were touting the long-term bullishness of the moves (for more information, follow Todd Neeley's coverage of the EPA and RFS on DTN). As for this analysis, what matters is how the market has reacted. Here we see corn did rally 3 cents Tuesday, likely in response to the market's 5-cent sell-off Monday. Meanwhile, the carry in both the old-crop July-to-September and new-crop December-to-March futures spreads continues to grow stronger, indicating a more bearish view of fundamentals by commercial traders. Keep an eye on the weekly close-only chart for the July-to-September, with key support at the previous low close of an 8-cent carry. A close this week below that would extend the downtrend the spread has been in for a number of weeks. Delivery of 124 contracts was reported against the May issue, putting the total at 2,540 contracts.

SOYBEANS There continued to be lots of chatter over the lack of soybean purchases by China Tuesday, with new headlines seen late in the evening and again early Wednesday morning. The fact of the matter is seasonally China backs away from U.S. supplies during the second-half of the marketing year (March through August), turning its attention to newly harvested South American supplies. This year, China continued to buy from the U.S. due to the difference in value created by cash prices. However, a recent surge in the U.S. dollar has changed the situation. It should be noted that Tuesday's session saw renewed commercial buying in soybeans following Monday's 25-cent sell-off. Given the same sort of activity was seen in soybean meal, don't be surprised if a new sale of soybeans to unknown, or possibly Argentina, is seen Wednesday morning or possibly Thursday, following the release of the weekly Export Sales and Shipments report. As with corn, the key to the soybean market is the trend of spreads. This week has seen the old-crop July-to-August dip below support on its weekly close-only chart at 2 3/4 cents (carry). What's important is where the spread finishes this week, after Thursday's USDA reports. Delivery of 68 contracts was reported against the May issue, putting the total at 1,038 contracts.

WHEAT Winter wheat markets were lower early Wednesday morning, led by the July Kansas City (HRW) contract. There we see a continued minor (short-term) downtrend at work with Wave A (first wave) already testing minor support at $5.33 1/4. This price marks the 38.2% retracement level of the previous 5-wave uptrend from $4.76 1/4 through last week's high of $5.68 1/2. If this support fails to hold, the 50% retracement level is down near $5.22 1/2. However, a Wave B (second wave) rally could come at any time, particularly with the retracement already seen by the contract. Fundamentally, there is little fresh news, with weather across winter wheat growing areas still in the spotlight. The U.S. Southern Plains (HRW) remain hot and dry, likely keeping the ongoing sell-off from becoming a bearish rout. No new deliveries were reported against the May Kansas City issue, keeping its total at 862 contracts. There are 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:	$3.68	$0.03	-$0.35	Jul	$0.006
Soybeans:	$9.49	$0.09	-$0.71	Jul	$0.005
SRW Wheat:	$4.82	$0.03	-$0.32	Jul	$0.000
HRW Wheat:	$4.95	$0.00	-$0.43	Jul	$0.013
HRS Wheat:	$6.02	$0.03	-$0.12	Jul	-$0.002

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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