DTN Before The Bell Grains

Morning CME Globex Update:

After a drop of 122 points on Thursday, Dow Jones futures are up 122 points this Friday, June crude oil is up 26 cents per barrel, the U.S. dollar index is up 0.1160, and June gold is up $2.10 per ounce.

Other Markets:

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

Corn:

As corn attempts to close higher for the seventh straight trading session, it is approaching the key 50-day moving average for July at $3.74 1/2, but is down a penny. The 50-day has always been a closely watched average by commodity funds who remain net-short an estimated 305,000 contracts of corn. We may get to that area by day's end as the forecast has not changed from the challenging cool and wet one for much of the Corn Belt for the next 10 to 14 days. On Friday, the outlook is for moderate to heavy rains to fall in the Plains and southeast Midwest, and flooding issues could expand in the central Midwest. The CME has declared force majeure at shipping locations on both the Illinois and Mississippi rivers due to the inability to load. This weekend, floodwaters near St. Louis are expected to reach 41-42 feet, halting all operations. The flooding is now being compared to the 1993 floods. It is thought that U.S. farmers will be hard pressed to even get 30%-35% of the corn crop planted by mid-May. Typically, some yield drag is expected when planted past May 10. As it is now, it may be likely that corn pollination in a majority of the crop will occur much later than normal into July heat. The central U.S. forecast looks to be cool and wet all the way to May 18. 2" to 6" of cumulative coverage is possible from the central and eastern Midwest, exacerbating an already soggy situation. Soil temperatures are also cooler than desired, retarding timely germination. The other side of the corn market is the major competition from South America, with the corn export pace still lagging compared to last year. Argentina continues to be very aggressive on corn sales with a crop that now appears closer to 48-50 million metric tons (mmt) rather than the 46-47 mmt of a month ago. Look for significant resistance for July corn from $3.71-$3.75. A rally and close above $3.75 could entice funds to exit a large portion of their net short. DTN's National Corn Index closed at $3.45 on Thursday, with an average basis of 26 cents under July.

Soybeans:

Soybean futures to begin Friday are stable at best, and slightly higher after scoring yet another new contract low on Thursday. July soybeans have now dropped 70 cents just since mid-April. New crop November also fell to the lowest level since July of 2018, and the soy/corn ratio of 2.23 to 1 is trying to encourage more corn than soybean acres, but many farmers may opt for the prevent plant option instead. U.S. soybeans into China are still more costly than Brazilian soybeans, and Argentine beans continue to be the world's bargain, estimated to be close to 75 cents per bushel lower than Brazil. The Argentine crop, though high yielding, is regarded as low protein and subject to discounts. The U.S.-China trade talks will resume next week in Washington, and many are optimistic that a final deal will be reached soon. The trade, however, is tired of the rhetoric, and wants action. Even with a deal, without additional soy purchases, the soybean balance sheet remains overwhelmingly bearish. China has not been as active lately as the African swine fever demand impact may be more than the trade suspects. Managed money funds have added to the soybean net short, and as of Friday are estimated to be short a record 165,000 contracts of soybeans. U.S. soybean export sales were a dismal 11.5 million bushels (mb) last week, and the total of 1.658 billion bushels (bb) compares to last year's 2.012 bb at this stage. It is likely U.S. exports could be cut, and ultimate carryout could move toward 1 bb. July beans will have some resistance on a bounce to $8.60-$8.70. The soybean futures market remains in a very oversold position. DTN's National Soybean Index closed at $7.57, and reflects an average basis of 86 cents under July. At 8 a.m. USDA reported 293,922 mt of soybeans were sold to Mexico for delivery in 2019-2020.

Wheat:

Following two consecutive higher closes, the wheat markets look challenged to rally for a third day with all three markets weaker to begin Friday. The Wheat Quality Council Tour finished their analysis and came up with a 47.2 bushel per acre average yield, and a crop of 306.2 million bushels (mb) in Kansas. The yield figures 15% above trend. The crop is said to be well behind schedule so the final yield is certainly a moving target. There is more talk of hard red winter wheat working into feedlots at the expense of corn into the southern Plains. Concern is mounting for soft red winter (SRW)disease (fusarium) potential as the very wet forecasts and flooding impacts the Delta and Eastern Wheat Belt. U.S. wheat exports last week were a dismal marketing year low of just 4.5 mb, and with just five weeks left, shipments will be hard pressed to meet the USDA projection. U.S. wheat is attractively priced for old crop, but in the new crop slot, Black Sea values are much cheaper. Wheat remains oversold, and funds short a sizable position. DTN's National HRW index closed at $3.89, and the average basis is at 16 cents under July.

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

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