DTN Early Word Grains

The Last Boat of the Day

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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6:00 a.m. CME Globex:

July corn was 3 cents higher, July soybeans were 2 cents higher, and July Kansas City (HRW) wheat was 4 cents higher.

CME Globex Recap:

Like the last boat of the day, the last morning of May has finally arrived. And it isn't just any morning, given Monday's holiday and Tuesday's sell-off, it looks to be a "Turnaround Wednesday" in the grain markets. Corn led the charge overnight, gaining back about half of Tuesday's loss, while rallies in Chicago wheat and soybeans were a bit more subdued. Outside commodities remained under pressure with energies, metals, and softs mostly lower. The U.S. dollar index and DJIA futures also failed to turnaround Tuesday's action with both showing small losses again.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 50.81 points (0.2%) lower at 21,029.47, the NASDAQ Composite dipped 7.00 points (0.1%) to 6,203.19, and the S&P 500 lost 2.91 points (0.1%) to 2,412.91 Tuesday. DJIA futures were 4 points lower early Wednesday morning. Asian markets closed mostly lower with Japan's Nikkei down 27.28 points (0.1%), Hong Kong's Hang Seng off 40.98 points (0.2%), and China's Shanghai Composite adding 7.12 points (0.2%). European markets were trading mixed with London's FTSE 100 up 13.98 points (0.2%), Germany's DAX adding 15.64 points (0.1%), and France's CAC 40 off 0.09 point. The euro was 0.0007 higher at 1.1194 while the U.S. dollar index lost 0.15 to 97.25. June 30-year T-Bonds were 2/32 higher at 154'21 while August gold added $1.30 to $1,267.00. Crude oil was $0.86 lower at $48.80 while Brent crude lost $1.04 to $50.80. China's Dalian soybean and Malaysian palm oil futures were both lower overnight.

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BULL BEAR
1) Export demand for U.S. corn continues to run ahead of USDA's projected pace. 1) Corn markets remain in sideways trend, with momentum indicating a possible test of the low end of ranges in the near future.
2) Soybeans could see light noncommercial short-covering support early Wednesday. 2) Soybeans fell to new lows for this sell-off overnight, indicating momentum remains bearish.
3) The long-term trend of cash HRW wheat remains up. 3) Commercial selling is expected to increase as winter wheat harvest draws near.

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 What rallied the corn markets, both old-crop and new-crop, overnight? Was it Tuesday's sell-off leading to a round of recovery buying that normally happens on a Tuesday? Or was it NASS' initial crop condition ratings that resulted in a DTN Crop Condition Index of 165 points, equal to the lowest initial mark for the last four years (2013)? Or could it been a little bit of both? The answer is most likely the last one, though the uptick in overnight volume occurred in old-crop July with 21,100 contracts changing hands through early Wednesday morning. This would seem to imply traders were more impressed with Tuesday's continued export inspection pace than new-crop conditions. And as last Friday's CFTC Commitments of Traders report showed, noncommercial interests continue to hold a large net-short futures position that could be covered in time.

SOYBEANS Old-crop soybean contracts were showing small gains early Wednesday morning, due in large part to continued solid export demand. However, the carry in the July-to-August futures spread continues to strengthen meaning support from commercial buying has almost run its course. If so that would suggest if the market is to rally, it will have to do so on noncommercial short-covering. Last Friday's CFTC Commitments of Traders report showed this group holding a substantial net-short futures position of 47,931 contracts, an increase of 19,108 contracts from the previous week. As for new-crop, the November contract was near unchanged early Wednesday after posting a new low for this sell-off of $9.15 1/2 overnight. Technical support on its weekly chart is between $9.19 and $9.01.

WHEAT Winter wheat contracts were higher early Wednesday with Kansas City erasing and Chicago trimming about half of Tuesday's losses. With harvest fast approaching, buying interest in either market could be fleeting at best. However there is still concern over the winter wheat crop given the countless deaths it has faced since February, with the possibility of continued buying interest tied to the relatively low price of the cash markets and continued pressure on the U.S. dollar index. Speaking of cash markets: The DTN Hard Red Winter Wheat National Index was calculated at $3.55 1/2 Tuesday evening, still showing a major (long-term) uptrend on its monthly chart.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.30 -$0.07 -$0.37 Jul $0.006
Soybeans: $8.46 -$0.14 -$0.67 Jul $0.000
SRW Wheat: $3.94 -$0.08 -$0.35 Jul $0.007
HRW Wheat: $3.55 -$0.04 -$0.78 Jul $0.007
HRS Wheat: $5.28 $0.00 -$0.40 Jul $0.004

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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Todd Hultman