DTN Before The Bell Grain Comments

Morning CME Globex Update:

The morning after USDA presented some wildly bullish estimates for corn and soybeans in the new-crop season, prices were back in the red early Friday for July contracts of corn, soybeans and all three wheats.

Other Markets:

Dow Jones:	Higher
U.S. Dollar Index:	Lower
Gold:	Higher
Crude Oil:	Higher

Corn:

July corn was down 3 1/4 cents early Friday, still not showing a bullish response to Thursday's lower-than-expected USDA estimate of 159.15 million metric ton (mmt) of world ending corn stocks for 2018-19. It seems likely that the market understands not to take these new-crop estimates too seriously as they are far more assumption than evidence at this point. USDA's estimate of old-crop ending corn stocks was kept at 2.18 billion bushels (bb), a number that seems more realistic and in tune with the current situation. While there is a lot of U.S. corn in storage and spot prices were challenging their highest prices in 22 months, the lure of a possible drought in Brazil is keeping some from selling, holding out for the chance of a higher price. Friday's satellite map shows clouds over Parana, offering a chance for rain while Mato Grosso stays mostly dry. Technically, the trends remains up in both, July and new-crop corn. May corn had 33 deliveries and showed 571 contracts of open interest early Friday. DTN's National Corn Index closed at $3.67 Thursday, still near its highest price in 22 months and priced 35 cents below the July contract. In outside markets, the June U.S. dollar is down 0.19 while other commodities are mixed.

Soybeans:

July soybeans were down 8 1/2 cents as traders that took Thursday's USDA bait spit the plug out early Friday. Let's face it, a new-crop estimate of 415 million bushels (mb) of ending U.S. soybean stocks is based on a lot of optimistic assumptions, including the White House singing Kumbaya with President Xi Jinping. Not that I am opposed, but at this point in time when U.S. soybean shipments are down 12% from a year ago and China has been missing from the list of buyers, both the old- and new-crop soybean stocks estimates look suspiciously low. And don't forget, we still aren't confident on how many acres will be planted this year and more than USDA's estimate of 89.0 million acres (ma) is also possible. So the market stumbles through the dark, pressured by a slow export pace while noncommercials hang on to a large bullish position. It is worth noting that there have been no daily export sale announcements for corn or soybeans in the month of May. Technically, the trend is down in July soybeans, but still sideways in new-crop soybeans where futures spreads show a bullish commercial outlook. Among May contracts, the CME Group reported 68 delivery intentions for soybeans, 45 for soybean oil, and none for meal early Friday. DTN's National Soybean Index closed at $9.50 Thursday, up from its lowest price in over two months and priced 71 cents below the July contract.

Wheat:

July Chicago wheat was down 5 1/2 cents and July Kansas City wheat was down 4 3/4 cents early Friday, still looking for support after USDA estimated world wheat production at 27.5 bb for 2018-19, not far below the previous year's record high of 27.9 bb. Given the severity of drought in the southwestern U.S. Plains, USDA's higher all wheat production estimate of 1.82 bb seems too high, but the smaller U.S. amounts pale in comparison to what the world might do, if this year's weather stays favorable. So far, the major wheat regions are mostly favorable, except for early dryness in Australia. USDA's new-crop estimate of 955 million bushels (mb) is down a little, but not much from the current year's 1.07 bb and does not offer wheat prices much bullish hope at this time. Technically, the trends are higher for the July contracts of both, Chicago and K.C. wheat. There were 41 deliveries for May Chicago wheat early Friday. DTN's National SRW index closed at $4.75 Thursday, down from its highest price in nine months and 31 cents below the July contract.

Todd Hultman can be reached at todd.hultman@dtn.com

FollowTodd on Twitter @ToddHultman1

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