DTN Before The Bell Grains

Morning CME Globex Update:

The Dow Jones average finished up 181 points on Thursday and Dow futures are showing a gain of 23 points early Friday. July crude oil is up 55 cents per barrel, the U.S. dollar index is down 0.3920, and August gold is down $5.60 an ounce.

Other Markets:

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

Corn:

After an impressive rally back from sharp losses Thursday, corn is down a couple of cents early Friday. A look at the morning radar map shows a clear path again for western and northern areas of the Corn Belt, but rains continue to move through the eastern and southern areas. Of course many problem spots remain. The 7-day forecast will continue to provide challenges in the Eastern Corn Belt, with the dry southeast getting welcome rains. Managed money funds are estimated to have bought 20,000 contracts of corn on Thursday, leaving them with a small net-long. The failure of both old and new crop corn futures to fill open chart gaps should be a positive sign for a continuation of the recent price advance, which saw a correction of near 30 cents per bushel on corn this week. Demand continues to be a challenge for the U.S. with much cheaper South American values cutting into U.S. exports. South Korea's FLC was said to have bought 65,000 metric tons of corn Thursday on an unannounced tender, likely from Brazil, for August-September. Corn export sales for the week ending May 30 were a net cancellation of 300,000 mt, and sales commitments remain 13% behind last year. Outstanding U.S. corn sales are said to be the lowest since 2013. It is likely that USDA will eventually lower exports and raise carryout. Talks with Mexican officials aimed at avoiding a 5% tariff set to be imposed on Mexican imports June 10 did not end with a solution but remain ongoing. Mexico's Foreign Secretary Marcelo Ebrard indicated that they would deploy 6,000 National Guard troops to the border with Guatemala to help stem the tide of migrants looking to enter the U.S. Next week's crop conditions are unlikely to give an accurate assessment of the true state of the late-planted corn crop, and the USDA report on Tuesday will likely only see minor cuts to both yield and acreage, versus private estimates hinting at a drastic fall in both. DTN's National Corn Index closed at $3.95 on Thursday, with an average basis of 26 cents under July.

Soybeans:

Soybeans are down slightly to begin Friday morning, and though soybeans also were able to muster a rally back from sharp early losses Thursday, they were unable to close higher. A bearish supply situation continues to overhang both the U.S. and world soybean markets. Prospects for higher acreage than March intentions, and lower demand resulting from both the U.S.-China trade dispute and African swine fever, makes it almost a certainty that U.S. soybean ending stocks will finish at a very burdensome and record large 1 billion bushels (bb). Export sales last week were decent, but remain 16% behind last year and 426 million bushels (mb) fewer when USDA is projecting a drop of only 354 mb. Managed money funds remain net-short a sizable soy position and do not seem in a big hurry to reverse that. U.S. soybeans, however, are said to be roughly a $19/metric ton (mt) discount to Brazil on a FOB basis and at parity with Argentina, giving the U.S. a leg up on any non-China soy business. Problematic is the fact that China still has 245 mb of unshipped sales, and without a trade war solution, there is the possibility of cancellation, although China indicates that they intend to honor those sales. Soybean planting should be making great strides in many western and northern areas of the Corn Belt this week, and although soybeans also have a record slow start, the trade has been reluctant to clip yield at this point. Both old and new crop futures are gravitating around the 50-day moving average early on Friday. Major overhead resistance on new crop November is up above, but not until $9.20-$9.30. Treasury Secretary Mnuchin meets with Chinese trade officials this weekend in Japan, so let's hope for some good news. DTN's National Soybean Index closed at $7.88, and reflects an average basis of 81 cents under July. At 8 a.m. USDA reported 110,000 mt of soybeans sold to Egypt, half for 2018-2019 delivery and half for 2019-2020.

Wheat:

As in corn, wheat futures made a very nice recovery from much lower values Thursday after Kansas City had fallen some 55 cents per bushel, and Chicago 40 cents per bushel from the highs set on Tuesday. However, Friday morning values are weaker to start despite more heavy rains and flooding in parts of southern Kansas and Oklahoma. Bullish concerns still exist with regard to hot and dry conditions in the Ukraine and southern Russia, along with the Canadian Prairies and Australian wheat areas. Saskatchewan soil moisture is reported to be 78% short or very short. However, a world record-large carryout and a burdensome U.S. ending stocks projection has provided a buffer for losses. The trade is still in disbelief over both U.S. winter wheat conditions at 64% good to excellent, and the first spring wheat condition rating at 83% good to excellent despite emergence of just 69%. The one bright spot for exports has been U.S. wheat, which is now slightly above the USDA projection, but the demand is not enough to overcome the still bearish supply and demand outlook. Bearish for not only wheat, but possibly also corn, is the idea that this year's winter wheat crop could not only include quality issues, but also be overall low protein. Those low protein supplies will likely be a weight on the delivery markets, but also likely make their way into feed rations and compete with corn. Another concern is that with cotton planting delayed with constant rains in the south, more sorghum will be the result. We hardly need more feed grains right now. DTN's National HRW index closed at $4.34, and the average basis is at 21 cents under July.

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

FollowDana on Twitter @mantini_r

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