DTN Early Word Grains

By Darin Newsom
DTN Senior Analyst

6:00 a.m. CME Globex:

July corn was 2 cents higher, July soybeans were fractionally lower, and July Kansas City (HRW) wheat was 2 cents higher.

CME Globex Recap:

Commodities in general were mostly higher early Friday, Cinco de Mayo, morning. In honor of the Mexican flag, grains were showing a mix of red and green with the soy complex lower while corn and the wheat complex posted small gains. Metals and energies were also higher while softs were mostly lower. DJIA futures were posting small losses and the U.S. dollar index a small gain as financial markets await the release of April jobs data (nonfarm payroll, unemployment).

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 6.43 points lower at 20,951.47, the Nasdaq Composite added 2.79 points to 6,075.34 and the S&P 500 gained 1.39 points to 2,389.52 Thursday. DJIA futures were 9 points lower early Friday morning. Asian markets closed mostly lower with Japan's Nikkei still closed for holiday, Hong Kong's Hang Seng off 207.53 points (0.8%), and China's Shanghai Composite down 24.33 points (0.8%). European markets were trading mostly lower Friday with London's FTSE 100 up 8.86 points (0.1%), Germany's DAX down 44.62 points (0.4%), and France's CAC 40 off 3.59 points (0.1%). The euro was 0.0025 lower at 1.0960 while the U.S. dollar index gained 0.10 to 98.88. June 30-year T-Bonds were 1/32 higher at 151'24 while June gold gained $6.10 to $1,234.70. Crude oil was unchanged at $45.52, after trading as low as $43.76 overnight, while Brent crude gained $0.13 to $48.50. China's Dalian soybean futures were unchanged to slightly lower while Malaysian palm oil futures were higher again overnight.

	BULL		BEAR
1)	Commodities in general, including corn, could look to recover some of Thursday's sharp sell-off.	1)	Extended weather forecasts are drier, possibly allowing for corn planting to start up again and putting pressure on new-crop December corn.
2)	Old-crop soybean futures spreads continue to reflect an increasingly bullish commercial view of supply and demand.	2)	Old and new-crop soybean markets still have to deal with Brazil's record large harvest.
3)	Trends in wheat remain up, despite the sell-off seen the last couple of days.	3)	Most of the fundamental news remains bearish for wheat.

The weekly Newsom on the Market column can be found on subscription sites only. On DTN Pro it is in News/Town Hall and on MyDTN in News/Columns.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Old-crop July corn continues to trend sideways with support at its recent low of $3.60 3/4 and resistance this past Monday's high of $3.79. Daily stochastics (short-term momentum study) remain neutral, not unusual during a sideways trend. Thursday's trade volume picked up from Wednesday's quiet session with most of the interest appearing to come from noncommercial traders. The fact they were selling was of interest, given they already hold a sizeable net-short futures position and the U.S. dollar index took a beating Thursday. Old-crop corn could be influenced by action in the commodity sector as a whole Friday. However, new-crop traders will continue to watch extended weather forecasts. December futures have initial support on their weekly chart at the four-week low of $3.79 1/4. The contract traded down to $3.83 3/4 during Thursday's sell-off. Delivery of another 471 contracts was reported against the May issue, putting the total at 4,651 contracts.

SOYBEANS The most interesting aspect of the soybean market is the fact the old-crop forward curve (futures spreads from July through September) is inverted. This would suggest the commercial side of the market holds a far more bullish view of supply and demand than what is currently tabulated by USDA. Also, it means there is a strengthening divergence between commercial traders and noncommercial traders, the latter who likely still hold a net-short futures position. Soybeans didn't really want to trade lower Thursday, but were bogged down by action in wheat and corn. Overnight trade was quiet, setting the stage for a possible rally to close out the week in old-crop soybeans. As for new-crop, the November contract could see light buying interest tied to drier weather forecasts across much of the U.S. Midwest for the next couple weeks. There were no new deliveries reported against the May issue, leaving the total at 3,132 contracts.

WHEAT Winter wheat markets are dealing with a number of fundamental issues (for more information, see Friday's Newsom on the Market column "Buenos Dias from a Lonely Newsroom"), making the technical aspect of new-crop July contracts more interesting. Starting with July Kansas City (HRW), the two-day sell-off to the overnight low of $4.42 1/2 from Tuesday's high of $4.74 3/4 was a test of the 50% retracement level of $4.43. While the contract's minor (short-term) trend remains up, a third day against the trend can't be discounted, particularly with a price gap sitting just below the 50% retracement level stretching to last Friday's high of $4.39 1/2. Below that, price support is pegged between $4.32 1/4 and $4.26 1/4. The trend on July KC's weekly chart is also up. Delivery of 38 contracts was reported against the May Chicago issue, putting its total at 1,326 contracts. Delivery of another 41 contracts was reported against the May Kansas City issue putting its total at 2,151 contracts.

	DTN Cash	Change From	National	Contract	Change from
Commodity	Index	Prev Day	Avg. Basis	Month	Prev Day
Corn:	$3.26	-$0.08	-$0.40	Jul	$0.003
Soybeans:	$9.01	$0.00	-$0.74	Jul	$0.008
SRW Wheat:	$3.95	-$0.16	-$0.43	Jul	$0.007
HRW Wheat:	$3.58	-$0.18	-$0.87	Jul	$0.009
HRS Wheat:	$5.04	-$0.14	-$0.43	Jul	-$0.002

Darin Newsom can be reached at darin.newsom@dtn.com

Darin can be followed throughout the day at www.twitter.com\DarinNewsom

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