DTN Before The Bell Grains

Corn and Soy a Bit Higher, Wheat Down

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

Morning CME Globex Update:

Dow futures are up 56 points in the overnight, June crude oil is up $1.22 per barrel, the U.S. dollar index is down 0.3430, and June gold is up $1.80 an ounce.

Other Markets:

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

Corn:

Corn is once again a bit higher, reflecting the lagging seeding pace and wet outlook for much of the central U.S. for the next ten days. Monday's crop progress report showed corn planting at just 15%, well behind the 27% average for this time of year. Several news outlets are speculating that final corn acreage could fall 1-2 million acres below recent intentions if the wet forecast verifies. The Eastern Corn Belt is well behind, with Indiana and Ohio most notable, and likely to be out of the fields for another 7 to 10 days. Tuesday's outlook is for rain in the southern and central Plains and Midwest, and some snow in the western Plains. The Delta and southeast U.S. looks to be mostly dry. Rains over the next 10-15 days could amount to 2-4" in parts of Missouri, Illinois, Indiana and Michigan. Corn inspections last week at 53.8 million bushels (mb) were above the weekly average needed with shipments 11% higher than a year ago, but at a slowing pace. Total inspections are 1.364 billion bushels (bb). There are some analysts who feel that without a pick-up in corn sales and shipments, we could see an even higher ending stocks number in coming reports. Brazil and Argentine corn is much cheaper than U.S. corn on a FOB basis, with Argentine offers said to be $12/metric tons (mt) cheaper. Funds covered a very small portion on Monday of what is their largest net-short position ever in corn. Not only is the corn position record-large, but the combined managed futures position of corn, all wheat markets, and soybeans and products is close to 700,000 contracts, also a record net-short. Argentina's corn harvest is approaching 30% complete. Look for July corn futures to find very formidable resistance in the $3.67-$3.70 range in the event of a further rally. DTN's National Corn Index closed at $3.33 on Monday, with an average basis of 29 cents under July.

Soybeans:

Soybeans are up a penny, just above the new contract low set in July futures on Monday, and the lowest we have seen soybeans since September. The U.S.-China trade talks resume in Beijing on Tuesday, and once again we have some positive comments emerging from both sides, with Treasury Secretary Mnuchin saying that he is hoping for substantial progress on Tuesday, and Larry Kudlow stating that talks are on the 7-yard line. We have heard the rhetoric before, but hopefully at the next meeting on May 8, we can get some closure. As in corn, managed money funds are now holding a record net-short in soybeans of near 134,000 contracts as of last Tuesday, but with export inspections still some 28% lower than last year, and a trade deal still weeks away, they don't seem fazed. It is very possible that U.S. soybean ending stocks could be moving toward one bb. Add to that the impending seeding delays for corn and spring wheat, and we could see more and unwanted soybean acres added to the mix. Soybean planting is just 2% done versus the average of 6%, with waterlogged Delta and southeast states well behind their average pace. Soybeans deliveries against the expiring May contract were 453 contracts. Soybean futures by any measure are severely oversold technically, but the funds are a confident bunch, and see little reason to cover yet. July beans would have to rally 20-30 cents to find much in the way of resistance. DTN's National Soybean Index closed at $7.69, and reflects an average basis of 92 cents under July.

Wheat:

The bearish beat goes on in all three wheat futures markets, with Chicago joining both Kansas City and Minneapolis in setting new contract lows overnight. Despite the hard red spring (HRS) planting being recorded at just 13 % complete versus a 33% average, and South Dakota said to be just 8% done compared to the usual 60%, wheat continues to sink as funds add to net shorts in those markets. The Wheat Quality Council Tour begins today, and is expected to show a very good hard red winter (HRW) crop despite the lowest planting area in many years. With a 64% good to excellent rating on winter wheat, up 2% on the week and the best in nine years, the trade would not be surprised to find that the HRW crop could approach 800 mb. Kansas is 58% good to excellent and Oklahoma is nearing 80%. Wheat heading is just 19% compared to the 5-year average of 29%. More rains are headed for the Southern Plains wheat areas over the next ten days. Last year's HRW crop was rated at just 33% good to excellent. The soft red winter crop is not faring quite as well. Deliveries in Chicago wheat were 924 contracts with zero deliveries in Kansas City. U.S. wheat inspections are lagging last year now by just 2%, but U.S. exporters face stiff competition for new crop as well, with Russian wheat offers for July said to be near $31/mt lower than U.S. HRW offers. As in soybeans, charts are very oversold, especially in Kansas City futures. DTN's National HRW index closed at $3.79, and the average basis is at 18 cents under July.

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

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Dana Mantini