DTN Before The Bell Grains

Morning CME Globex Update:

Following the Dow Jones average 139-point lower close on Thursday, Dow futures are down another 164 points. June crude oil is up 17 cents per barrel, the U.S. dollar index is up .1400, and June gold is up $3.30 per ounce.

Other Markets:

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

Corn:

Corn futures have traded on both sides of Thursday's close in the overnight as traders await not only the USDA report Friday morning, but any possible news from the ongoing trade talks. The USDA report is expected to reveal a higher old-crop carryout again and the first look at new-crop. The Trump administration has turned up the heat on China, moving tariffs higher once again to 25% on $200 billion of Chinese goods. A series of tweets from President Trump seem to be preparing U.S. farmers and traders for a worst case scenario, as China's commerce department has promised retaliation. July corn has now fallen 16 cents a bushel since the high set on Wednesday. Export inspections for last week were reported at a marketing year low 11.3 million bushels (mb), while shipments were 45.4 mb. Total commitments are 1.824 billion bushels (bb) compared to 2.032 bb the previous year. The weather has turned drier for the next seven days in many areas, allowing for better planting progress. On Friday, it will be dry in the Midwest and Plains, with cooler temperatures still, but moderate-to-heavy rains will occur from southeast Texas and through the Delta and far southern U.S. It is expected that farmers will be hard pressed to have planted 35-40% of the crop as of this Sunday. That means that roughly 60% of the crop could be planted after the optimal May 10 time frame, generally recognized as the time when yield is impacted. Linn Group reports a rumor of Argentine corn moving into Mexico, and Argentine corn is cheaper than U.S. corn into the U.S. southeast. Managed money funds remain short a huge amount of corn futures, now estimated to be 342,000 contracts. First resistance on July corn will be at $3.58-$3.59. DTN's National Corn Index closed at $3.28 on Monday, with an average basis of 27 cents under July.

Soybeans:

Following another new contract low set on Thursday, July soybeans are now moving lower again, and have fallen over $1.00 per bushel just since mid-April. The trade is anxiously awaiting results of Friday's second meeting of trade representatives, with a final China trade deal hoped for. However, the imposition of higher tariffs that took effect at midnight, and a series of early morning tweets from President Trump has resulted in a more pessimistic expectation. The Trump administration has implied that China has backpedaled on many of the earlier agreed to concessions. Trump has assured U.S. farmers that they will be taken care of. Friday's USDA report is expected to reveal a higher U.S. ending stocks number, and the first look at 2019-20 numbers, with carryout expected to be even larger. Also included will be South American production, with CONAB, the Brazilian government's food and statistical agency, recently raising Brazil soy production to 114.3 million metric tons (mmt), but that is far lower than several other private forecasts, and the USDA's 117 mmt from April. U.S. soybean sales for last week were a net negative of 5.5 mb, with shipments at 22.3 mb. Total commitments are down 407 mb from last year. China still has 6 mmt (220.4 mb) of U.S. soybeans on the books that have not shipped, and in the event of no trade deal, these could be canceled. South American premiums have been rising steadily, with Brazil up seven cents on Thursday and Argentina up 10 cents and up some 40 cents for the week. U.S. soybeans are now said to be cheaper than Brazil. China's soybean production is pegged at 17.27 mmt, up 8% versus a year ago. The U.S. Ag Attache said that China's soybean imports will amount to just 84 mmt this year, and 83 mmt for 2019, compared to 94 mmt last year. African swine fever is the primary culprit. Managed money funds continue to add to their growing net short on soybean futures, now estimated to be 192,000 contracts. The July soybean chart still shows a large gap up at $8.40 left six days ago. DTN's National Soybean Index closed at $7.28, and reflects an average basis of 85 cents under July.

Wheat:

Wheat is mixed, but mostly lower in the overnight, and has moved sideways to lower in the last 10 days. Both Kansas City and Chicago are hovering above contract lows. Although wheat was not expected to be impacted as much by a China trade deal, there have been numerous expectations that China would agree to buy both U.S. wheat and corn if a deal were signed. U.S. wheat sales for last week were a marketing year low of just 3.3 mb, with total sales now 938.9 mb compared to 945 mb a year ago. New-crop wheat sales were much better and are well ahead of this year's pace, with 15 mb of new crop sold last week. Friday's USDA report is expected to show the 2018-19 ending stocks level moving higher to 1.1 bb, with the first look at 2019-20 expected to be just slightly lower. In Friday's USDA report, winter wheat is expected to be 1.277 bb versus 1.184 bb last year, with hard red winter (HRW) production average pegged at 767 mb versus just 662 mb last year. There are a host of private estimates that are closer to 800 mb on HRW. Managed money funds remain net short a large wheat position as well, with Kansas City still record large. DTN's National HRW index closed at $3.82, and the average basis is at 16 cents under July.

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

Follow Dana on Twitter @mantini_r

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