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 3 cents higher, and July Kansas City (HRW) wheat was 5 cents higher.

CME Globex Recap:

The grain and oilseed complex bounced back from Wednesday's lower close to trade higher overnight into Thursday morning. Some might say it's a "Turnaround Thursday." The fate of the markets will be determined by USDA late Thursday morning with the release of the May Supply and Demand and Crop Production reports. The general consensus is this set of numbers is expected to be extremely bullish for corn, less so for soybeans and wheat. Energies and metals were also higher overnight as the U.S. dollar index weakened.

OUTSIDE MARKETS:

The Dow Jones Industrial Average closed 182.33 points (0.8%) higher at 24,542.24, the Nasdaq Composite gained 73.00 points (1.0%) to 7,339.91, and the S&P 500 added 25.87 points (1.0%) to 2,697.79 Wednesday. DJIA futures were 9 points higher early Thursday morning. Asian markets closed mostly higher with Japan's Nikkei 225 up 88.30 points (0.4%), Hong Kong's Hang Seng gaining 273.08 points (0.9%), and China's Shanghai Composite adding 15.26 points (0.5%). European markets were trading mixed with London's FTSE 100 down 19.35 points (0.3%), Germany's DAX up 65.35 points (0.5%), and France's CAC 40 down 3.75 points. The euro was 0.0023 higher at 1.1876 as the U.S. dollar index lost 0.20 to 92.92. June 30-year T-Bonds were 6/32 higher at 142'27 while June gold gained $2.20 to $1,315.20. Crude oil was $0.52 higher at $71.66 while Brent crude added $0.38 to $77.59. China's Dalian soybean futures were quietly mixed overnight.

	BULL		BEAR
1)	USDA's May numbers for corn, both old-crop and new-crop for domestic and world, are expected to be bullish Thursday.	1)	Oddly enough, from a technical point of view, both July and December corn could find themselves in minor (short-term) downtrends.
2)	Announcements of new sales of U.S. soybeans could follow the weekly export sales and shipments update and before the release of USDA's May reports.	2)	The July futures contract is sitting on the brink of a bearish breakdown, technically, that could pull the contract below $10.
3)	July Kansas City (HRW) wheat looks set to move into the retracement phase (Wave B) of its short-term 3-wave downtrend.	3)	If pre-report estimates are anywhere close to realized, USDA's numbers would be viewed as bearish for wheat in general.

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MORE COMMODITY-SPECIFIC COMMENTS

CORN USDA is expected to be the catalyst for another round of buying in the corn market Thursday. While domestic old-crop ending stocks are expected to change much from April, the world number is expected to be trimmed due to production cuts in both Brazil and Argentina. But it's new-crop that will garner all the attention, despite the fact there are no actual known factors in the ending-stocks equation. The domestic number is expected to come in at 1.631 billion bushels (bb) while global ending stocks are projected to fall to 182.00 million metric tons (mmt). If realized, both would be the lowest ending stocks figures dating back through the 2014-2015 marketing year. Keep in mind though that it's May 2018, and these projections are for the end of August 2019. From a technical point of view, it's interesting to note that both old-crop July and new-crop December contracts look to be in position for a minor (short-term) sell-off. However, as seen in crude oil of late, short-term technical signals are easily overridden by long-term trend patterns. Delivery of 112 contracts was reported against the May issue, putting the total at 2,652 contracts.

SOYBEANS Soybean contracts rallied enough overnight into Thursday morning to erase what was left of Wednesday's losses. July soybeans continue to hold minor (short-term) technical price support at $10.13 while daily stochastics sit below the oversold level of 20%, poised for a bullish crossover. This doesn't mean the contract can't go lower, because no actual buy signal has been established yet. If the contract does break through this support and go to a new weekly low below Monday's $10.10 3/4, next support is down at $9.94 3/4. USDA's domestic and global ending stocks estimates are expected to be largely neutral for soybeans Thursday, with little change seen in the old-crop figures. The more interesting set of guesses could be this year's production numbers for both Brazil and Argentina, with the former expected to increase 116.6 mmt (115.0 mmt in April) and the latter decrease again to 38.6 mmt (40 mmt in April). Delivery of 57 contracts was reported against the May issue, putting the total at 1,095 contracts.

WHEAT The wheat complex was higher early Thursday morning, erasing most of Wednesday's losses. July Kansas City remains in a minor (short-term) downtrend on its daily chart, though in position to post a rally that could retrace much of the recent sell-off from the recent high of $5.68 1/2 through Wednesday's low of $5.27 1/4. Fundamentally, winter wheat markets remain bearish, as indicated by the strong carry in the forward curves for both Kansas City (HRW) and Chicago (SRW). USDA isn't expected to do the wheat complex any favors, with pre-report estimates indicating expectations for a generally bearish outcome. Domestic old-crop ending stocks aren't expected to change much, with the average coming in at 1.067 bb (as compared to USDA's April guess of 1.064 bb). USDA's old-crop world ending stocks guess is expected to come in at 271.30 mmt as compared to its previous 271.22 mmt. USDA is also set to release its guess on domestic 2018 all wheat production, estimated at 1.757 bb as compared to last year's 1.741 bb. Yes, that means despite all the problems the HRW crop is facing, U.S. wheat production as a whole is expected to increase year-to-year. No new deliveries were reported against the May Kansas City issue, keeping its total at 862 contracts. There continues to be no deliveries reported against the May Chicago issue.

	DTN Cash	Change From	National	Contract	Change from
Commodity	Index	Prev Day	Avg. Basis	Month	Prev Day
Corn:	$3.67	-$0.01	-$0.35	Jul	-$0.001
Soybeans:	$9.44	-$0.05	-$0.71	Jul	-$0.002
SRW Wheat:	$4.79	-$0.04	-$0.32	Jul	$0.003
HRW Wheat:	$4.89	-$0.06	-$0.43	Jul	$0.004
HRS Wheat:	$5.99	-$0.03	-$0.12	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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