DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones future are down 40 points early Friday morning, July crude oil is down 3 cents per barrel, the U.S. dollar index is .2280 higher, and August gold is up $11.50 an ounce.

Other Markets:

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

Corn:

Corn is again surging higher early Friday morning, extending recent gains as speculation continues about ultimate yield and acreage of the U.S. corn crop. Funds appear to be adding to a new net long in corn as the U.S. corn supply takes a huge hit from the estimates of just a month ago. Managed funds, according to one commission house on Friday, could now be long 170,000 contracts of corn. Although just light to moderate rains are falling in some areas, the weekend forecast is for rains to move east across the Eastern Corn Belt and Delta into midweek. The forecast calls for 1 to 2 inches of rain in southern Illinois, Indiana, Ohio and Michigan -- areas where the planting is well behind. Private analysts are beginning to stair-step down yield, acreage and ending stocks for U.S. corn, but in the meantime, U.S. corn has priced itself out of world markets. Argentine corn offers are as much as 60 cents per bushel cheaper than U.S. on an FOB basis. Export sales last week reflected that with a dismal 6.6 million bushels sold, bringing the total commitments to 1.905 billion bushels, 14% below a year ago. While exports have suffered from both the rally and logistics problems on the rivers, farmers are holding tight to supplies, and tightening spreads and rising prices are trying to pry bushels loose from the now bullish farmer. Rumors this morning are that an Ohio ethanol plant paid as much as 70 over July futures for corn on Thursday. The anticipation is for Eastern Corn Belt supplies to tighten drastically, but there should be no lack of supply currently. Both July and December corn futures look to have broken out of a large bull flag chart pattern, which suggests much higher prices could be ahead. Technical traders suggest the next major resistance on July corn could be at $4.65. DTN's National Corn Index closed at $4.20 on Thursday with an average basis of 22 cents under July.

Soybeans:

While the focus has been on corn yield, acreage and production the past few weeks, the soybean market is beginning to come into play more now. With an expected 85% of soybeans planted as of this coming Sunday, there would still be roughly 13 million acres left to plant. The forecast, especially in the slow Eastern Corn Belt areas, suggests more heavy rains and planting delays. USDA suggested the July report will reveal changes to both soybean acreage and yield. Despite the overall very bearish U.S. and world balance sheets, the managed money funds, still thought to be net short around 100,000 contracts of soybeans, have started to cover those shorts. They are estimated to have bought 10,000 contracts Thursday and close to 35,000 for the week, no doubt influenced by weather and the surging corn market, but remain short close to 100,000 contracts. U.S. export sales and shipments continue to suffer and sales of just 9.6 mb last week brings the total to 1.724 bb, down 16%. China is rumored to have bought as many as 30 cargoes of Brazilian beans in the past week. New-crop sales of U.S. soybeans at just 2 mmt (74 mb) are well behind last year's 7 mmt (257 mb) and said to be the lowest in 14 years. Bothersome is the effort by some Chinese buyers to delay shipment of some unshipped sales, increasing fears of cancellations. Even with all of that bearish news, soybeans also look to be breaking out of a flag chart pattern, but some major resistance on November beans should emerge from $9.30 to $9.50. DTN's National Soybean Index closed at $8.10 and reflects an average basis of 78 cents under July.

Wheat:

As in the soybean market, wheat supplies both here and in the world still paint a bearish landscape. The world is expected to have a record large ending stocks total of 294.3 mmt. However, wheat is now going for its fifth consecutive higher close this week, as Chicago July wheat has rallied into new recent highs and 45 cents above Monday's lows. Heavy rains expected to fall in parts of Oklahoma and Kansas have stoked fears of more quality issues, but also expectation for a very low protein hard red winter (HRW) crop. Although harvest is well behind the average pace, as the harvest is moving north, protein levels appear to so far be running 1% lower than normal. The basis for 10% protein wheat is weakening and HRW wheat appears more likely to increasingly find its way into feed rations. While hard wheat supplies will be in plentiful supply this year, there is a very tight soft red (SRW) balance sheet, and SRW is now said to be a sharp premium to HRW export offers. In fact, SRW is being called the most expensive wheat in the world, and even U.S. HRW is currently a big premium to both Russian and EU wheat offers. Wheat export sales last week were 12 million bushels and total sales of 226 mb in the 2019-2020 season are running 36% above year ago levels. The upside in wheat should surely be capped, but if corn explodes higher, it is likely wheat could follow. DTN's National HRW Index closed at $4.49 and the average basis is at 19 cents under July.

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

FollowDana on Twitter @mantini_r

(CZ)

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