DTN Before The Bell Grains

Wheat Lower, Corn and Soybeans Slightly Lower in Quiet Trade

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Following Monday's 66-point lower finish, the Dow Jones June futures are 161 points lower, June crude oil is down 66 cents per barrel, the U.S. dollar index is up .0740, and June gold is down $2.80 an ounce.

Other Markets:

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

Corn:

Corn is little changed on Tuesday morning following Monday's weakness spurred on by concern about the upcoming China trade talks. Word Tuesday morning is that the Chinese trade delegation, including Vice Premier Liu will be coming to Washington for what would be the 11th round of talks this week. Farmers and traders are hoping for a resolution to the long-standing trade spat, which prior to Sunday, many had hoped might be settled by mid-May. Monday's Crop Progress report detailed a planting pace on corn of just 23% versus a 5-year average of 46%. While Nebraska, Iowa and Kansas made decent strides, Minnesota, Indiana, Michigan and Ohio are lagging badly, and South Dakota has zero corn planted. The weather for the next seven days will stifle seeding efforts as moderate-to-heavy rain is slated to fall in many central and eastern areas, and northern areas are colder than desired as well. The planting pace is the slowest since 2013. Export inspections for corn last week were 38.5 million bushels (mb), and the total shipments are still 7% higher than last year, but the pace has been steadily slowing. Competition for U.S. corn exports has been and will continue to be fierce. Safras and Mercado, a leading Brazilian consultancy, revised their Brazil corn production up 2.2 million metric tons (mmt) to a record large 101.76 mmt -- well above the USDA's last estimate of 96 mmt. Add to that an Argentine corn crop that continues to grow, and U.S. exports will continue to be challenged. July corn is now 10 cents above the lows set on Monday and fourteen cents above the contract low set last week. Funds remain net short a huge position of over 300,000 contracts. July should see very good selling in the $3.70 area. DTN's National Corn Index closed at $3.39 on Monday, with an average basis of 25 cents under the July.

Soybeans:

Although soybean futures have still not filled the large gap on charts left in Sunday's overnight trade, Monday trade saw soybeans rally 12 cents above the new contract lows made. Initial pressure on Sunday was fueled by President Trump's tweet suggesting that tariffs on Chinese goods would once again be raised this coming Friday as China was dragging its feet on trade promises. Some talk of China backpedaling on technology transfer issues, and the still unfilled promise by China to buy 7 mmt of the second 10 mmt soybean purchase pledged by China had the President angered. Fears that the trade talks scheduled in Washington might be canceled as a result of the threat, pummeled markets early Monday. On Tuesday morning, it appears that Vice Premier Liu and a host of China trade representatives will still be coming to Washington. U.S. farmers and traders are hoping that a trade deal can still be signed soon. U.S. soybean export inspections continue to lag last year severely, at 27% lower, while competing soy crops in South America appear to be even larger. Both Safras and Mercado and Abiove, the Brazilian oilseeds association, peg the Brazilian crop at 117.6 million to 117.9 mmt - above USDA's 117 mmt and a host of private analysts in the 115 million to 116 mmt range. Brazil soybean exports for the year so far are said to be 14% higher than a year ago. Managed money funds added to a growing and record large net soybean short position, which as of last Tuesday, was close to 150,000 contracts. Estimates are that Monday's sharply lower trade was fueled by fund sales of another 11,000 contracts. The wet forecast in the U.S. for the next week has many in the trade fearing additional soybean acres that the U.S. balance sheet does not need. Look for July soybeans to have the first resistance at $8.40 area - the area of the overnight gap lower. DTN's National Soybean Index closed at $7.45, and reflects an average basis of 85 cents under July.

Wheat:

Kansas City wheat on Monday was about the only ag commodity to finish in the green. All three wheat markets begin Tuesday lower and KC is just three cents above the contract low. Monday's Crop Progress report had winter wheat conditions holding steady at a hefty 64% good to excellent, and the best since 2010. Key hard red winter (HRW) states of Kansas, Oklahoma and Texas ranged from 58 to 74% good to excellent, and are offset by some key soft red (SRW) states, such as Illinois and Ohio - states in which the poor to very poor conditions are nearly as high as good to excellent. Fears of an increase in wheat disease, such as Fusarium, continue to grow, as eastern belt conditions are excessively wet. Spring wheat planting is just 22% done compared to a five-year average of 49%, with key states North Dakota just 13% planted, Minnesota only 7% planted and South Dakota 19% planted compared to its average of 76%. In addition to wet conditions, the Northern Plains have been colder than normal, also delaying efforts. Heavy rains in Kansas and Missouri are leading to flash flooding concerns as well. U.S. wheat inspections thus far are still 2% below last year, as the U.S. continues to face stiff competition. France exported 2.15 mmt in March -- the largest exports of the season thus far. Both European and Black Sea wheat crops, with good weather from here on out, are expected to produce much larger crops than last year's drought-impacted production. DTN's National HRW index closed at $3.88, and the average basis is at 15 cents under the July.

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

FollowDanaon Twitter@mantini_r

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Dana Mantini