DTN Before The Bell Grains

Morning CME Globex Update:

Following Tuesday's 512-point gain in the Dow Jones average, Dow futures are again pointing higher, up 90 points early Wednesday morning. July crude oil is down 74 cents per barrel, the U.S. dollar index is down 0.3160 and July gold has hit a new high and is up $19.20 an ounce.

Other Markets:

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

Corn:

After its 4th effort to break through multi-year resistance at $4.38-$4.39 on spot corn, July has now fallen 20 cents from those highs in the past two days. A slightly warmer and drier weather pattern for at least the western and northwestern part of the Corn Belt will allow better planting progress. There are storms moving across Illinois, Indiana and Ohio this morning, keeping this area one of greatest concern. Also weighing on the corn market is a rumor U.S. southeast feeders are importing South American corn, with one rumor noting Smithfield Foods taking 1 million metric tons (mmt), or roughly 40 million bushels (mb) from Brazil and Paraguay. U.S. Gulf corn is said to be priced some $22/metric ton (mt) above Argentine corn as well, the widest premium in a few years. With ideas of both Brazilian and Argentine corn production moving higher as harvest advances, competition is sure to continue to be formidable. The recent U.S. rally from the lows set in mid-May of 95 cents on July and 90 cents on December had priced U.S. corn out of world markets. Nothing has changed on the narrative of sharply reduced U.S. corn planted acreage, with still over 30 million intended acres of corn left to plant as of Sunday, and a probable yield drag that has many analysts sharply reducing U.S. corn stocks. USDA has said that it will take into consideration the cool and wet conditions on the June report according to various media outlets, and are likely to make a modest acreage and yield reduction then. The major driver of the recent corn rally has fallen by the wayside as managed money funds have now covered all of their once record-short of 344,000 contracts. To begin Wednesday trade, funds are thought to be close to even. Often funds will cover a major short and begin to get long. If that happens, this bull market correction could end quickly. The open chart gaps at $4.05 on July and $4.20 on December would be the logical target, but expect trade to remain choppy and volatile ahead of the June 10 deadline for President Trump's tariff threat on Mexico. Mexico's top officials revealed an optimistic attitude overnight that a solution can be reached, while even some GOP senators are pushing back on the potential tariffs. DTN's National Corn Index closed at $3.99 on Tuesday, with an average basis of 26 cents under July.

Soybeans:

Soybeans are lower to begin on Wednesday morning as both July and November futures have fallen 18-20 cents from Tuesday's early highs. There are still two gaps left on charts, and unlike corn, managed funds are still short an estimated 115,000 contracts of soybeans, along with 53,000 contracts of bean oil and a modest meal short. Perhaps some good news is that China's minister of finance is accepting applications for waivers on tariffs, and those waivers are said to be applicable to beef, pork and soybeans along with other goods. China is also making moves to control the unchecked African swine fever (ASF), which has dampened demand. As fears escalate, South Korea indicates that North Korea so far will not cooperate in protecting the spread of ASF near the Korean border. U.S. soy demand remains tepid, and the prospect for a 1 billion bushel (bb) carryout looks more real. Planting of soybeans, which are also going in at a record slow pace, are expected to accelerate rapidly this week, with trade feeling another unwanted 1.5-2 million acres of soybeans could be added to March intentions. The House finally passed the $19.1 billion disaster aid package, and farmers wonder if an increased payment for prevented planting might be a part of that package. On a resumption of the recent soy rally, look for major resistance to emerge once again at $9.10-$9.20 on nearby futures, and $9.20 to $9.35 on November beans. DTN's National Soybean Index closed at $8.00, and reflects an average basis of 81 cents under July.

Wheat:

Kansas City wheat, after reaching new recent highs during Tuesday night's trade, has now plunged 43 cents per bushel in two days. Chicago July also is down nearly 40 cents in that time. A drier outlook and reduced flooding concerns for soggy Kansas and Oklahoma hard red winter (HRW) wheat ahead of harvest, along with improvements expected in Russian, Australian and Canadian wheat areas, is partly responsible for the sell-off. On a further break, Kansas City July should see support in the range of $4.40 to $4.44, with Chicago finding support at $4.85. While temperatures are expected to heat up, there are still rains headed for Kansas, Oklahoma, Arkansas and Missouri, affecting already waterlogged areas. Monday's condition report was a huge surprise to the trade expecting a decline in winter wheat conditions and instead got an improvement back to 64% good to excellent, and one of the best readings in years. The first spring wheat condition report showed an astounding 83% good to excellent versus a trade expectation of close to 60%. Certainly all of the rain and flooding ahead of harvest, which has seen combines rolling as far north as the Dallas area, will compromise quality, and a lower protein crop is likely. The prospect for off-grade and low protein wheat to compete with corn on feed is likely also pressuring the corn market. DTN's National HRW index closed at $4.48, and the average basis is at 20 cents under July.

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

FollowDana on Twitter @mantini_r

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