DTN Before The Bell Grains

Corn & Soybeans Showing Overnight Gains, Wheat Mixed

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

The Dow Jones average, after finishing 81 points higher on Friday, has Dow futures showing down 11 points in the overnight. June crude oil is down 25 cents per barrel, the U.S. dollar index is up 0.0260, and June gold is down $4.60 per ounce.

Other Markets:

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

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Corn:

The corn market is showing signs of strength again Monday and July is now 14 cents above the contract low set last week. As corn fell last week, managed money funds added to their net-short position, which is now record short at an estimated 344,000 contracts as of last Tuesday. We are likely seeing a bit of weather premium added back in to start this week, as the next two weeks for the central U.S. appears to be wet following a weekend which saw cooler than normal temperatures and even snow in the Dakotas and northern growing areas. On Monday, rain and snows will be found over much of the Midwest and Northern Plains, with all central U.S. crop areas projected to be wet on Tuesday with cold temps. The seeding discussion is back on the front burner again as the trade tries to assess how many corn acres might be shifted to soybeans or not planted at all. Monday's crop progress is expected to show a corn planted number of 15-17% compared to the 5-year average of 25%. I have seen ideas that final corn acres could be one to two million acres below USDA's projection. U.S. exports continue to be challenged as corn in the southern hemisphere is discounted by anywhere from $10/metric ton (mt) to $17/mt to U.S. Gulf corn values. Without a sharp acceleration of U.S. corn sales and shipments, there are thoughts that U.S. ending stocks could move to 2.2 to 2.3 billion bushels (bb). The weaker South American currencies have also made South American crops much cheaper versus U.S. with the Argentine peso having dropped 16% this year, and the Brazilian Real also lower last week. July corn will have formidable resistance in the $3.67-$3.70 area. DTN's National Corn Index closed at $3.32 on Monday, with an average basis of 29 cents under July.

Soybeans:

Soybeans are three cents higher Monday, but remain just four cents above recent lows after plunging 27 cents last week on huge managed money fund selling. According to the CFTC, managed money added 38,000 contracts to their net-short and are now a record net-short of just under 134,000 contracts. Mixed reports of the U.S.-China trade progress came out over the weekend, with Treasury Secretary Mnuchin saying that he has hopes for a final trade deal signing after just two more talks, with the first this week in Beijing. Fox Business Network is reporting that the enforcement mechanism is close to done. President Xi Jinping has been giving positive talks about China concessions and the finalization of the trade deal, while Bloomberg, on the other hand, talked of significant issues still unresolved. Brazil's soy harvest is now over 92% done, while Argentina's harvest is 51% complete. However, Argentina has some problems with the sinking peso, inflation running at 55%, and government bonds said to have a 60% chance of default. There is again talk of raising taxes on ag exports. Argentina's soy crop is lower protein and U.S. soymeal sales could be the big beneficiary. However, soybean prices, without a trade deal that involves more China purchases, will struggle as South American beans hold a strong discount to U.S. offers. African swine fever continues to be a big problem, with North Korea the latest Asian country to find it on their soil, and China has now banned pork and related product imports from neighboring Cambodia as ASF was recently found there. Rain, snow and cooler temperatures will rekindle thoughts of higher soybean acreage in the U.S. It appears that the next two weeks will be a challenge to get corn and spring wheat in the ground. Soybeans are hugely oversold, but lack the bullish input to get much of a rally going, with July's resistance way up at $8.90. DTN's National Soybean Index closed at $7.75, and reflects an average basis of 92 cents under July.

Wheat:

Kansas City wheat made another new contract low in the overnight, with expiring May having breached the $4.00 level, and July just five cents above that. KC fell 18 cents per bushel last week as funds continued to sell. Managed money funds are now sitting at a net-short 76,000 contracts in Chicago and a record 55,400 in Kansas City. Minneapolis wheat is getting a bit of a bounce, with new crop September having stopped at the $5.20 level for four consecutive days. Spring wheat planting in coming days will be a real challenge, but with hard red spring stocks at multi-year highs, this is a balance sheet that can use less acres. Rain and snow impacted the Northern Plains this weekend and will again this week, with temps also falling to the 20s and 30s. Saudi Arabia is said to have purchased 620,000 mt of milling wheat on their tender late last week, on an optional origin basis. U.S. hard red winter (HRW) is said to be advantageously priced. Shipment is for July to September. The Kansas Wheat Tour will begin this week and the trade will be awaiting reports from the field, with winter wheat good to excellent ratings more than double last year, at 62%. The trade looks for hard red spring (HRS) planting to show only 14-15% complete on Monday afternoon and that compares to a 36% five-year average planting pace. DTN's National HRW index closed at $3.88, and the average basis is at 19 cents under July.

Dana Mantini can be reached at dana.mantini@dtn.com

FollowDanaon Twitter@mantini_r

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Dana Mantini