DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones June futures are up 35 points, May crude oil is up 23 cents per barrel, the U.S. dollar index is up 0.3600, and June gold is up 70 cents per ounce.

Other Markets:

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

Corn:

The corn market continues to trade at low volume and in a small range just above the weekly trend line support. Slack new export demand and a South American corn crop that appears to be getting larger signals tough times ahead for U.S. exports. Celeres was the latest to publish their updated estimates, and though they left Brazilian corn unchanged, they are the highest that we have seen at a record 97.8 million metric tons (mmt). The South American corn basis has weakened as harvest has progressed and farmers both there and in the U.S. remain undersold. The interior basis in the U.S. is firmer, with farmers more intent on fieldwork, and hoping for a China trade deal, are reluctant sellers. Managed money funds are also reluctant to exit their very large net-short corn position, sellers of another 5,000 contracts on Wednesday, and estimated now to be short a huge 310,000 contracts (1.550 billion bushels (bb)) of futures and options combined. Ethanol production picked up slightly last week, but stocks continued their descent, down 2.2% with the 22.9 million gallons now well under the record of 24.4 million gallons just a few weeks ago. Ethanol margins have improved in the last few weeks and, although we continue to miss the weekly production needed to achieve USDA's demand number, we should see increased ethanol demand the next few weeks. U.S. weather will see moderate to heavy rain in the eastern Midwest and Delta and mostly drier elsewhere. The Northern Plains looks to be mostly dry for the next week, but from eastern Illinois into Indiana and Ohio, there will be heavy rain and possible flooding. The trade is anxiously awaiting any China news in the hope that it includes corn, ethanol or DDGs, and the Wall Street Journal suggests that a signing ceremony could take place in late May or early June. Today, the market braces for the release of the Mueller report and any market-moving information that might hold. May corn needs to support at $3.55-$3.56, and resistance will now be $3.62-$3.63. Last week's export sales for 18-19 were 37.3 million bushels (mb), and total commitments are 1.759 bb, down 9% from a year ago. Shipments were 48.2 mb, above the weekly total needed to achieve the USDA total. DTN's National Corn Index closed at $3.37 on Wednesday, with an average basis of 21 cents under May.

Soybeans:

May soybeans have plunged twenty cents in the past two days as South America's advancing harvest and continued fund selling has pummeled soy futures to the lowest level since November 1, 2018. Funds have added to their net soybean short, which now stands close to 95,000 contracts, but combined grain and oilseed fund shorts are thought to be a huge 625,000 contracts now. That is an unusual position to hold ahead of the U.S. growing season! Just as other major analytical firms have bumped their Brazilian and Argentine soybean production estimates on good finishing weather, Brazil grain analyst Celeres raised their Brazil production estimate by two million tons to 115.8 mmt, slightly below USDA's 117 mmt estimate. They see Argentina's crop at 55.9 mmt, close to USDA's 56 mmt, and some 18 mmt above last year. The trade is hoping for a China deal soon to support soy prices, but the most recent late May/early June signing prediction is still quite a ways off. With Brazil and Argentine soybeans offered at a sharp discount to U.S., our exports will continue to struggle and an ending stocks number near 1 bb is possible without a China deal. Also pressuring U.S. soy futures is the fact that the Brazilian Real currency fell hard Wednesday, adding to producer profit potential in Brazil, and encouraging sales there. On a positive note, there is talk that due to a low stress growing season, Argentine soybeans have low protein leading to meal discounts, perhaps leading to a boost U.S. meal sales. The next level of support for May soybeans looks to be at $8.70-$8.72, with resistance now first at $8.86-$8.90. Export sales last week for 18-19 were 14 mb and total commitments at 1.627 bb are 18% below a year ago. Shipments of 17.3 mb are well under the 33.8 mb needed per week to reach USDA's total. DTN's National Soybean Index closed at $7.96, and reflects an average basis of 83 cents under May.

Wheat:

Winter wheat futures markets are under pressure again early Thursday with Kansas City just a few cents from the new contract low set two days ago. Minneapolis is down slightly, and has now bounced five times from the $5.20-$5.21 range on May. While U.S. wheat offers in the old crop slot are cheaper than Russian values, the window is closing for new old crop sales, and U.S. shipments are still lagging last year. In the new crop July-August slot, both Russian and EU offers are holding discounts of $15/mt to U.S. wheat. There is also talk of Russian infrastructure improvements and the potential to export a lot more wheat in the coming year, with early crop estimates approaching 85 mmt compared to just 71.7 mmt last year. Domestically, hard red winter mill bids were said to be close to 10-15 cents per bushel lower than last week on low proteins as mills are satisfied. Weather will be kind to hard red winter (HRW) growing regions with more rains, but heavy rains in eastern Midwest and Delta soft red winter (SRW) areas are not desired in already saturated fields. As if we needed more bearish world wheat news, analysts peg India's wheat crop to be close to 103-105 mmt compared to last year's 99.7 mmt, and that would be record large. Funds remain short a pretty sizeable wheat position as well, and that will surely add fuel for a rally in the event of a bullish surprise. However, right now, the bears remain in control. Wheat export sales for last week for 18-19 at 11.7 mb make total commitments of 915 mb, up 8% from a year ago. Shipments of just 18.4 mb is well under the weekly average of 31.7 mb needed to reach USDA's projection. DTN's National HRW index closed at $4.08, and the average basis is at 13 cents under May.

Dana Mantini can be reached at dana.mantini@dtn.com

FollowDanaon Twitter@mantini_r

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