DTN Early Word Grains

Grains Mixed on Planting Delays, Rain for the Southern Plains

6:00 a.m. CME Globex:

July corn is up 2 cents per bushel, July soybeans are up 1/2 cent, and July K.C. wheat is down 2 1/2 cents.

CME Globex Recap:

Global equity markets are mostly weaker Monday morning, as is the U.S. Dollar Index, following a run to two-year highs on Friday. Another week focused on trade as the United States' top two negotiators resume talks today in Beijing before their Chinese counterparties come to Washington next week. Financial media would certainly suggest progress is being made and a deal is likely by the end of May or the beginning of June. This week will also see the next Federal Reserve FOMC meeting where the Fed is expected to leave its neutral policy toward interest rates unchanged. Grains are mixed Monday morning with row crops higher on incoming moisture and planting delays while winter wheat futures are softer with beneficial rain seen in the southern plains and the start of the Wheat Quality Council tour. May Kansas City wheat futures traded with a "3-handle" Friday and Monday morning as the contract nears delivery

OUTSIDE MARKETS:

Previous closes on Friday showed the Dow Jones Industrial Average up 81.25 at 26,543.33 and the S&P 500 up 13.71 at 2,926.17 while the 10-Year Treasury yield ended at 2.505%. Early Monday, the June DJIA futures are down 1 point. Asian markets are lower with Japan's Nikkei 225 down 48.85 (-0.22%) and China's Shanghai Composite down 23.9 points (-0.77%). European markets are lower with London's FTSE 100 down 20.56 points (-0.28%), Germany's DAX down 47.32 points (-0.38%) and France's CAC 40 down 16.15 points (-0.29%). The June Euro is up 0.001 at 1.120 and the June U.S. dollar index is down 0.031 at 97.695. The June 30-Year T-Bond is down 1/32nds, while June gold is down $4.70 at $1,284.10 and June crude oil is down $0.64 at $62.66. Soybeans on China's Dalian Exchange were down -0.18% while soybean meal was up 0.2%.

BULL BEAR
1) The large spec net position in corn surged to a new record last week while the same group is holding the second largest soybean net short on record dating back to 2006. 1) Statistics Canada expects Canadian farmers to plant the largest area to wheat since 2013/14 with production seen at the second highest on record.
2) Latest GFS model runs are putting 0.75"-3.00" of rain across a large swath of the southern plains and Midwest during the coming week. 2) On Friday, the U.S. Dollar Index hit the highest level since May 2017 while the Brazilian Real hit the lowest level since September.
3) Based on FOB offers Friday, U.S. HRW should be very competitive in the upcoming Saudi Arabia wheat tender for June shipment. 3) 471,000 tons of grain moved through the Mississippi River system last week, down 28% from a year ago according to the Army Corps of Engineers.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn futures are higher to begin the week, supported by a new record fund short position as well as the most recent forecast showing widespread rain across the Corn Belt in the coming 7 days. Corn planting progress on Monday afternoon's crop progress report is expected to show 15-17% complete nationally vs. 17% last year and a 5-year average of 25%. The deficit with average would be expected to grow on next week's report as farmers wait for better field conditions. Large spec traders increased their record net short position last week by 10,597 contracts to 334,262 contracts. Based on our calculations using commitments of traders data and report day settlements, the weighted-average non-commercial short position put on since February 5 is $3.78 basis July futures. Importantly, there have been 88,227 shorts added since April 2 with a weighted-average price of $3.67 which rests just above current prices. It will not take much price strength to put a large chunk of these recently added positions underwater and at-risk of covering. Also supportive was the fact the gross commercial long position rose to 769,072 contracts which is the third largest position on record as end users see current levels as a value area. Index traders are now holding their smallest net long position on record at 208,821 contracts. One area of concern heading into the May WASDE is the export program which needs to see 26.9 million bushels (mb) of corn sold each week through August to hit the current USDA forecast. This would be the largest export program from May through August since 2006.

SOYBEANS Soybeans are also higher Monday morning, supported by their own record fund short position as well as positive comments from Chinese President Xi regarding trade concessions. Bloomberg carried a headline over the weekend suggesting President Xi appeared to be offering his personal approval of the concessions that China is likely to make as part of an imminent U.S.-China trade deal. Trade talks between the two sides are expected to resume Monday in Beijing. As noted above, large spec traders sold 37,844 contracts last week to put their net short position at the second largest on record at 146,206 contracts. Like corn, the gross commercial long position rose steadily last week to 417,300 contracts which is the second largest position on record. The aggregate fund short position across the entire soy complex now stands at 229,806 contracts which is also a new record. While on the subject, the aggregate fund position across corn, soybeans, meal, oil, Kansas City wheat, Minneapolis wheat and Chicago wheat is now a net short of 653,632 contracts which is easily a new record. As we move toward the May WASDE, we continue to be mindful of the struggling soybean export program. Soybean export commitments as a percentage of the USDA forecast stood at 87.9% on April 23 which is below the 94.3% five-year average. To bring that ratio up to the five-year average, the USDA forecast would need to fall by 125 mb.

WHEAT Wheat contracts are mixed with winter wheat contracts slightly lower while spring wheat is posting solid gains. April has not been kind to wheat contracts despite the fact the month is typically strong from a seasonal perspective. Spring wheat planting is expected to be 14-15% complete on Monday afternoon's crop progress report vs. 10% last year and 36% average. With the weekend moisture across parts of North Dakota and all of South Dakota, little progress is expected in the Dakotas this week with the lack of heat in the forecast. If there is one balance sheet which can afford to lose acres, however, it would definitely be the HRS balance sheet. Many private analysts are expecting hard red spring carryout stocks for 2019/20 to be the largest since the late 1980's. There were no record positions set on Friday's commitments of traders report, but managed funds did move to the second largest net short on record in Minneapolis wheat. Like its winter wheat brethren, new crop spring wheat futures are trading at the lowest level since 2006 for late April. Adding to spring wheat woes was news Canadian farmers plan to seed to the largest area to wheat in six years. Barring sharply sub-trend yields, this should allow them to be incredibly competitive on the export front again this year, especially if the Canadian dollar remains "cheap" to the U.S. dollar.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.32 $0.04 -$0.29 Jul $0.001
Soybeans: $7.75 -$0.05 -$0.92 Jul $0.007
SRW Wheat: $4.14 $0.02 -$0.29 Jul $0.007
HRW Wheat: $3.88 -$0.04 -$0.19 Jul -$0.005
HRS Wheat: $4.67 -$0.05 -$0.45 Jul -$0.026

Tregg Cronin can be reached at tmcronin31@gmail.com

Tregg can be followed throughout the day on Twitter @5thWave_tcronin

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