DTN Early Word Grains

Back from the Brink

Darin Newsom
By  Darin Newsom , DTN Senior Analyst
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6:00 a.m. CME Globex:

July corn was 2 cents higher, July soybeans were 7 cents higher, and July Kansas City (HRW) wheat was 4 cents higher.

CME Globex Recap:

Grain markets, soybeans in particular, took a step back from the edge to trade higher overnight through early Friday morning. What looks to be renewed commercial buying supported soybeans, with spillover support seen in corn and wheat. Outside commodities were mostly higher as the U.S. dollar index sold off and the Brazilian real strengthened.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 56.09 points (0.3%) higher at 20,663.02, the NASDAQ Composite rallied 43.89 points (0.7%) to 6,055.13, and the S&P 500 gained 8.69 points (0.4%) to 2,365.72 Thursday. DJIA futures were 27 points higher early Friday morning. Asian markets closed mostly higher with Japan's Nikkei up 36.90 points (0.2%), Hong Kong's Hang Seng gaining 38.36 points (0.2%), and China's Shanghai Composite adding 0.49 point. European markets were trading higher with London's FTSE 100 up 38.15 points (0.5%), Germany's DAX rallying 40.59 points (0.3%), and France's CAC 40 gaining 30.96 points (0.6%). The euro was 0.0057 higher at 1.1160 while the U.S. dollar index lost 0.41 to 97.48. June 30-year T-Bonds were 4/32 lower at 153'22 while June gold slipped $1.00 to $1,251.80. Crude oil was $0.42 higher at $49.77 while Brent crude gained $0.43 to $52.94. China's Dalian soybean futures were lower and Malaysian palm oil futures were higher overnight.

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BULL BEAR
1) Total export shipments of corn remain bullish, indicating USDA's projected total demand of 2.225 bb is too low. 1) Has the 2017 corn crop reached the tipping point where forecasts of rain could now be viewed as bearish? We'll find out Friday.
2) Both old-crop July and new-crop November soybeans are in position to establish double-bottom technical patterns on weekly charts. 2) The situation in Brazil is far from stable, leaving global soybean markets vulnerable to another round of strong commercial selling.
3) Another round of strong spring storms overnight could bring commercial buying back to winter wheat. 3)

Total export shipments of wheat are indicating USDA's demand projection of 1.035 is too high.

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 For all the fireworks and fretting during Thursday's soybean meltdown, corn contracts didn't break out of long established sideways patterns. Overnight into Friday morning saw both old-crop July and new-crop December recover slightly, falling back into quiet habits with the former showing trade volume of 8,200 contracts and the latter 1,400 contracts. Both are still working with bullish fundaments given Thursday's strong weekly export sales number (for the week ending Thursday, May 11) putting projected total demand at 2.467 bb, or 242 mb above USDA's May estimate. New-crop has a wetter forecast for the U.S. Midwest heading into the weekend and beyond, if traders haven't already reached the tipping point of rain now being bearish for the crop.

SOYBEANS The soybean markets (both old-crop and new-crop) stabilized overnight into Friday morning, finding support for now just above previous lows. For old-crop July that means the $9.41 1/4 mark and $9.41 1/2 for new-crop November. Both danced precariously close to the edge during Thursday's meltdown, a day that ended with President Temer of Brazil refusing to resign. Why this has stabilized the market is difficult to say: Brazil's government remains swamped with corruption, its currency (the real) is unstable, and farmers continue to hold a massive supply of newly harvested soybeans. From a technical point of view both July and November could be trying to establish double-bottom patterns on weekly charts, though renewed commercial buying will need to be seen in July and noncommercial interest in both for previous lows to hold.

WHEAT Winter wheat markets found renewed buying overnight as another round of violent storms smashed their way across the U.S. Southern Plains Thursday evening. The worst of these began in central Oklahoma before working their way through Kansas, leaving more hail damage and flash floods in their wake. Both July Chicago (SRW) and July Kansas City (HRW) held support at previous lows on their respective weekly charts, with renewed commercial buying indicated by the weakening of carry in futures spreads. Whether or not either market can build bullish momentum over the course of Friday's session remains to be seen, but renewed selling in the U.S. dollar index could certainly help. However, Thursday's weekly Export Sales and Shipments report put total marketing year shipments at 908 mb, projecting to total demand of 966 mb. This is below USDA's May estimate of 1.035 bb and would indicate cancelations of previous sales, or more likely rolling those sales to new-crop, could be seen.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.29 -$0.05 -$0.37 Jul $0.008
Soybeans: $8.76 -$0.31 -$0.69 Jul $0.001
SRW Wheat: $3.87 -$0.02 -$0.39 Jul -$0.008
HRW Wheat: $3.45 $0.00 -$0.81 Jul $0.008
HRS Wheat: $5.05 $0.03 -$0.40 Jul -$0.005

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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