DTN Before The Bell Grains

Clear Skies, Widespread Planting and Harvesting Send Markets Lower

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

Morning CME Globex Update:

After a gain of 263 points Friday, Dow futures are again higher -- up 122 points early Monday. July crude oil is up 22 cents per barrel, the U.S. dollar index is up .2770 and August gold is down $13.80 an ounce.

Other Markets:

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

Corn:

Corn is lower again to begin the new week as planters were rolling in many areas over the weekend and widespread progress is expected to be reported on the Crop Progress report released at 3 p.m. CDT Monday. The news that the U.S. and Mexico came to an agreement over immigration control and President Donald Trump's threatened tariffs were avoided seemed to have little impact on a market already under pressure on improved planting conditions and weak demand. The fact the agreement, contrary to statements made from the administration, provided no guarantee of increased ag purchases likely weighed on corn as well. Mexico is already a large buyer of U.S. corn. Mexico did agree to send troops to their southern border to stem the tide of migrants, and made a change in laws to allow the return of migrants to Guatemala. The CFTC Commitment of Traders report showed managed money funds not only covered all of their record net short since April, but were long 95,000 contracts as of last Tuesday, having bought in 409,000 contracts of corn in seven weeks. Funds are estimated to have sold 18,000 contracts last Friday, putting them net long an estimated 50,000 contracts to begin Monday. Planting progress as of Sunday is expected to show 82% to 85% of corn planted, compared to 100% average at this time of year. That would leave approximately 15 million acres left to plant. The first crop condition on corn is expected Monday afternoon and there is a wide range of expectations. I have heard from just 49% to 53% good to excellent to as high as 62% to 63% -- both still the worst in some time. Tuesday's USDA report is expected to show a corn ending stocks number of 1.794 billion bushels versus the last report of 2.485 bb. Look for the open chart areas to provide support in the corn market -- July corn at $4.04 3/4, and December at $4.20. On the upside, December should have trouble at $4.35-$4.37. DTN's National Corn Index closed at $3.90 on Friday, with an average basis of 26 cents under July.

Soybeans:

Soybeans are again under pressure Monday, having now fallen 45 cents from the highs just five days ago. Managed funds in soybeans had bought in just 27,000 contracts as of last Tuesday and remained short 108,000 contracts. Funds were net sellers of an estimated 9,000 contracts on Friday and seem comfortable with their bearish bet. Soybean planting progress on Monday's crop progress report is all over the board with some estimating beans to be 52% to 55% done, while I have seen 66% to 70% as well. Soybean demand continues to leave much to be desired with cheaper South American values capturing much of the demand and African swine fever continuing to take a toll on demand. China's soybean imports in May were down 24% from a year ago at 7.36 mmt, according to the General Administration of Customs. For the first five months of 2019, China imports were 31.75 mmt -- down 12.2% versus last year. On Tuesday's USDA report, traders expect U.S. exports to be cut by at least 50 million to 75 million bushels or more. Early on Monday morning, both old- and new-crop soybean futures are just above the 20-day moving average and threaten to break down further and test the remaining open chart gaps which are down 20 cents from there. With little progress on the U.S.-China trading impasse, stagnant demand, and a possible increase in soy acreage from March intentions, there is little to get excited about in the soybean market. DTN's National Soybean Index closed at $7.76, and reflects an average basis of 80 cents under July.

Wheat:

Wheat pressure continues early Monday with Kansas City July now down 55 cents since last Tuesday's high. With mostly clear weather, winter wheat harvest has advanced a bit but dry down is slow; southern Oklahoma is actively harvesting where it has dried out. As expected, yields are big, but protein is low, with early southern Oklahoma protein said to be near 10%. Early Texas protein called 10.5% to 11.3%. Kansas City mill bids for protein are moving higher with 12% protein bids said to be up 23 cents per bushel last week. Managed money funds had covered much of their shorts, but as of last Tuesday remained short 12,000 Chicago and 25,000 Kansas City wheat. A few wheat problem spots remain in the world, with dryness in Canada, Russia and Australia, though the EU is thought to have increased supplies this year amounting to 15 mmt to 17 mmt. Corn is likely also seeing some pressure from wheat, where a good portion of the lower protein and quality challenged hard red winter wheat is expected to make its way into feed rations. Some analysts are already looking at 200 million to 250 million bushels of wheat being fed. DTN's National HRW index closed at $4.31, and the average basis is at 18 cents under July.

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

FollowDana on Twitter @mantini_r

(CZ)

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Dana Mantini