DTN Early Word Grains

By Darin Newsom
DTN Senior Analyst

6:00 a.m. CME Globex:

July corn was 1 cent higher, July soybeans were 2 cents higher, and July Kansas City (HRW) wheat was 2 cents higher.

CME Globex Recap:

The first morning of summer, according to the meteorological calendar, has grains showing green. Gains were consistent across the board with all three major markets up 1 to 2 cents. Outside commodities were mixed with energies recovering from Wednesday's sell-off, metals lower, and softs mixed. The U.S. dollar index was also trying to gain back some of its recent loss while DJIA futures were posting a small gain.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 20.82 points (0.1%) lower at 21,008.65, the NASDAQ Composite dipped 4.67 points (0.1%) to 6,198.52, and the S&P 500 lost 1.11 points to 2,411.80 Wednesday. DJIA futures were 1 point higher early Thursday morning. Asian markets closed mostly higher with Japan's Nikkei up 209.46 points (1.1%), Hong Kong's Hang Seng gaining 148.57 points (0.6%), and China's Shanghai Composite down 14.55 points (0.5%). European markets were trading mostly higher with London's FTSE 100 up 28.13 points (0.4%), Germany's DAX adding 43.13 points (0.3%), and France's CAC 40 gaining 37.96 points (0.7%). The euro was 0.0012 lower at 1.1232 while the U.S. dollar index gained 0.14 to 97.12. September 30-year T-Bonds were 8/32 lower at 153'18 while August gold lost $7.20 to $1,268.20. Crude oil was $0.11 higher at $48.43 while Brent crude lost $0.01 to $50.75. China's Dalian soybean futures were lower while Malaysian palm oil futures were mixed overnight.

	BULL		BEAR
1)	Corn market volatility tends to increase in June. If seen this year it could be as a result of noncommercial short-covering.	1)	Corn futures spreads continue to reflect a neutral-to-bearish long-term view of market fundamentals.
2)	The weak carry in the soybean July-to-August futures spread could be signaling stronger than expected demand for this time of year.	2)	Old-crop, cash, and new-crop soybeans all posted major (long-term) bearish technical signals as May came to a close.
3)	The most bullish factor for winter wheat? At least long-term trends aren't down.	3)	Winter wheat harvest is fast approaching, bringing with it expected seasonal commercial selling.

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 As its monthly chart reflects, the corn market has come to a standstill with the July contract posting a 14 3/4 cent trading range for the entire month of May. It's interesting to note that both futures and cash (DTN National Corn Index) continue to hover near the midpoint of major (long-term) sideways trends (for more information, see DTN's Technically Speaking blog updated Thursday morning). Fundamentally the song remains the same for both old-crop and new-crop, with the former watching export demand while the latter focuses on weather as summer gets under away (according to the meteorological calendar). However, June tends to bring with it a rapid rise in market volatility (see weekly chart posted in DTN Six Factor strategy). For that to be the case this year, the catalyst will likely need to be noncommercial short-covering tied to a stronger than expected old-crop demand or, of course, new-crop weather. Last Friday's CFTC Commitments of Traders report showed this group methodically reducing their net-short position by another 30,631 contracts (weekly chart also available in DTN Six Factor strategy).

SOYBEANS The end of May saw both old-crop July and new-crop November soybean futures contracts complete bearish technical patterns a month in the making. Both established bearish outside months, meaning they traded above the previous month's high, below the previous month's low, leading up to Wednesday's lower monthly close. Furthermore, both closed well below April settlements adding bearish salt to the wound (for more information, see DTN's Technically Speaking blog posted on early Thursday morning). As summer gets under way (again according to the meteorological calendar) soybeans were showing gains, led by a 3-cent pop in November. The more interesting aspect of the market could be activity in the July-to-August futures spread as June gets under way. The carry remains weak, and if trimming begins again it would reflect stronger than expected demand for this time of year. On the other hand, if the spread continues to trend down (strengthening carry) it would reflect the seasonal slowdown in soybean demand over the last quarter of the marketing year has begun.

WHEAT To say the overnight rally in winter wheat is tentative would be a gross understatement. Yes, contracts were posting small gains, but as Wednesday showed the path of least resistance remains down. Still, monthly charts aren't as bearish as one might think with major (long-term) uptrends only on hiatus rather than being gone entirely (for more information, see DTN's Technically Speaking blog updated early Thursday morning). Winter wheat harvest is approaching quickly, possibly looking to T-bone unsuspecting market bulls who happened to cautiously pull into the intersection too early. But as has been mentioned in this analysis more than once over the last many months, damage (or lack thereof) to the crops from a long list of ailments will be known as the combines start to roll.

	DTN Cash	Change From	National	Contract	Change from
Commodity	Index	Prev Day	Avg. Basis	Month	Prev Day
Corn:	$3.35	$0.05	-$0.37	Jul	$0.000
Soybeans:	$8.50	$0.05	-$0.66	Jul	$0.013
SRW Wheat:	$3.97	$0.03	-$0.33	Jul	$0.029
HRW Wheat:	$3.55	-$0.01	-$0.77	Jul	$0.008
HRS Wheat:	$5.33	$0.04	-$0.39	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

(KA)

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