DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are up 114 points, July crude oil is up 77 cents per barrel, the U.S. dollar index is down .0840 and June gold is down $2.40 an ounce.

Other Markets:

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

Corn:

After Thursday's selloff from a second challenge of major resistance, fueled by much confusion over the second set of farm aid payments unveiled by the Trump administration, corn is right back up early Friday morning. The weather situation remains the same -- a very wet forecast promises to limit fieldwork with corn planting as of last Sunday at the slowest pace in history. Overnight and on Friday morning the deluge continues with rains traversing Oklahoma, Kansas, Nebraska, Iowa, South Dakota and parts of Wisconsin and Illinois. The forecast for the next 7 days and even extending into the first week of June is wet. Trade estimates for the amount of corn planting completed by Sunday are pegged at 60% to 65%. As of last Sunday, there were still 47 million acres of corn left to plant based on March intentions. Prevented planting acre estimates are growing with guesses ratcheted up to an extreme of 10 million acres from earlier thoughts of 3.5 million to 4 million. However, the new Market Facilitation Payment (MFP) proposal suggests proceeds from the new $16 billion farm aid package would only be paid to those farmers who plant. This has resulted in confusion. The payments were designed to not affect 2019 planting decisions and are based on a "single county payment rate times a farm's total planted acres in 2019." It seems the premise is to not only protect U.S. farmers hurt by trade conflicts with China, the EU and Turkey, but to discourage large usage of the prevented planting option. Funds, who had been covering corn likely sold more corn late Thursday and are still estimated to hold a short of close to 180,000 contracts, including options. Export sales on corn were a tepid 17.4 mb last week and total commitments of 1.864 bb compares to 2.105 mb last year. Watch for more resistance on a third attempt at $4.00 on July and selling at $4.15-$4.18 on December with a close above those levels bullish. DTN's National Corn Index closed at $3.63 on Thursday with an average basis of 27 under July.At 8 a.m. USDA reported 113,000 mt of corn were sold to Mexico for delivery in 2018-2018.

Soybeans:

Soybeans have popped back up Friday morning after being under pressure all Thursday and weakening as the trade confusion over the terms of the new MFP proposed emerged from the White House. The failure to reveal specific payment rates and the expected coverage of all crops was different from initial reports which suggested a $2.00 payment for soybeans and a huge incentive to plant more soybeans at a time when we have too many. Funds sold soybeans again Thursday and are thought to once again be holding close to a record net-short position. For seven straight trading sessions, July and November soybeans have failed to close above the 20-day moving average. It looks like another attempt will be made to rise above $8.31 on July and $8.55 on November, which could lead to a further rally. The MFP payments will allegedly be made in three installments with the first to be July-August -- the only one guaranteed. Fall and early 2020 payments are dependent on progress in the China trade talks. Soybean export sales last week, at 19.7 mb, brought the total to 1.682 bb compared to 2.028 bb last year. China still has 257 mb of open sales that are unshipped and traders fear that without a trade resolution these sales could be canceled. President Donald Trump on Thursday was confident of a quick resolution to the China trade conflict, but certainly the roll out of the new MFP does not reflect such optimism. Brazil soybean premiums have moved sharply higher as China has turned to buying more from there. With the sharp rise in premiums there and the equally sharp fall in the Brazilian real (down 9% since harvest), Brazilian farmers are enjoying high prices. Likewise, the sharp fall in the Argentine peso has made their soybeans attractive, while Thursday trade saw the U.S. dollar index reach a new contract high. Look for a rally and solid close above the 20-day average to lead to further soy gains with major resistance 30 to 40 cents above that. DTN's National Soybean Index closed at $7.39, reflecting an average basis of 82 cents under July.

Wheat:

All three wheat markets are back up following Thursday's weakness, as less panic regarding the aid package and a continued detrimental weather pattern in both winter and spring wheat areas looks to extend for another 10 days at least. Heavy rains on mature winter wheat in both hard red (HRW) areas and soft red (SRW) areas will likely lead to lodging and quality issues. The anticipated decline in the HRW crop is not supported by reports from a private crop tour, which has shown great stands and yield potential in many areas. Heavy rains in the Northern Plains continue to suggest more spring wheat may not get planted, especially in South Dakota, with some analysts penciling in close to 1 million acres unplanted versus 400,000 acres a week ago. Wheat export sales were a tepid 1.8 mb last week for old crop with 12.7 mb of new crop sold, but wheat sales and shipments remain higher than a year ago. The recent rally, however, has priced U.S. HRW out of export markets. As in corn and soybeans, funds remain net short wheat with estimates of Chicago wheat with options over 100,000 contracts. Friday's CFTC report will be closely watched to see what fund activity was through Tuesday. DTN's National HRW Index closed at $4.10 and the average basis is at 15 under July.

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

FollowDana on Twitter @mantini_r

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