DTN Before The Bell Grains

Wheat Higher, Corn Mixed & Soy Weak Again

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

Morning CME Globex Update:

Following Thursday, where equities made new highs and finished lower, with the Dow Jones down 163 points, and Dow futures are currently down 22 points. June crude oil is down $1.14 per barrel, the U.S. dollar index is up 0.0530 and June gold is down $12.90 an ounce.

Other Markets:

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

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Corn:

July corn is attempting its sixth consecutive higher close Thursday as the very wet forecast is getting more traction, and funds, who had been short a record amount of corn, have bought in some of those shorts. Funds still remain net-short a hefty 310,000 contracts, down from the record managed money short of 344,000 contracts a little more than a week ago. On Thursday, funds were estimated to have bought in 20,000 contracts. July is now in a strong resistance zone, with a close above $3.70 likely to result in a run at the 50-day moving average of $3.75. Thursday weather features moderate to heavy rains in the southeast Plains through the central and eastern Midwest, according to DTN Senior Meteorologist Bryce Anderson. Flash flooding is likely in some areas. The forecast looks to remain mostly cool and wet all the way to mid-May, with 2"-5" in many areas, and as much as 5"-9" possible in Texas, Louisiana, Arkansas and into Indiana and Ohio. Planting delays will become much worse, with next week's planting estimate around 24% and about 20% behind average. It is said that past May 10, we are likely to see some impact on corn yield. The most talked about analog year was 2013, which saw a loss of 1.8 million acres March to final, and a drop of 4 bushels per acre (bpa). Recent corn strength has been in the face of Argentine corn FOB offers said to be the cheapest in ten years. Argentina's corn crop is still on the rise, with some analysts suggesting a final crop of 48 to 51 million metric tons (mmt) compared to the 46-47 mmt estimates of a month ago. Ethanol production was down 2.2% last week, while stocks were little changed, with corn used for ethanol at 105.6 million bushels for (mb) the week. Export sales for 18/19 for the week ending April 25 were 23.1 mb, making the total commitments 1.813 billion bushels (bb) and down 10% from last year, while export shipments of 53.8 mb put total shipments up 13% versus a year ago. DTN's National Corn Index closed at $3.42 on Wednesday, with an average basis of 27 cents under July.

Soybeans:

Soybeans are once again lower with July soybeans having fallen 69 cents just since mid-April. Funds continue to sell and are adding to a net-short estimated to be close to 185,000 contracts. Much cheaper South American offers, along with the slow-moving China trade talks, and ideas that the ongoing wet pattern is likely to result in an unwanted addition to soybean acres, have emboldened noncommercial traders. As in corn, analysts see the potential for the Argentine soy crop to grow even larger by the final count, with estimates even as high as 58 mmt from the 56-56.5 mmt we saw just a few weeks ago. The fall in Argentina's peso and fears of an increased export tax has resulted in an aggressive shipping pace from there. There continue to be positive news stories from the U.S.-China trade talks, with what is thought to be the final meeting scheduled for May 8. The Trump administration's alleged softening up on some intellectual property demands and thoughts that a reduction in part of the tariffs might be part of the deal has U.S. trade representatives optimistic. The soybean market is as technically oversold as it has been in quite some time, at some point likely leading to a bounce higher. So far, funs have had little reason to cover shorts, with U.S. and world record supplies. The first resistance zone on July beans looks to be at $8.60-$8.70, 10 to 20 cents per bushel above current values. Soybean export sales for the week ending April 25 were 11.5 mb for 18/19 and total commitments are now 1.658 bb and down 18% versus a year ago, while last week's shipments of 20.8 mb makes total shipments now 26% lower than last year. DTN's National Soybean Index closed at $7.66, and reflects an average basis of 86 cents under July.

Wheat:

All three wheat futures markets are higher again following recent new contract lows. Funds, who are also short a record Kansas City wheat position and a sizable Chicago position, bought in some of those shorts on Thursday. The potential for flooding rains in parts of the already water-logged soft red winter (SRW) wheat belt, along with U.S. wheat becoming much more competitive in world markets led to the bounce. The Wheat Quality Council Tour has the second day results from the southwestern areas of Kansas at 47.6 bushels per acre (bpa) according to DTN Staff Reporter Emily Unglesbee (@emily_unglesbee), and that yield compares to last year's 35.3 bpa and a 5-year average of 39.3 bpa for the same route. However, with the crop some four to six weeks behind schedule, the critical stage could be in the midst of early summer heat. Hard red winter premiums on Thursday fell again by as much as 15 cents per bushel, but that made U.S. HRW offers one of the cheapest in the world at least into June. Russian wheat has a major edge beyond that. Wheat may also be getting a boost from reports that HRW may be working its way into feed in the U.S. southwest. Wheat export sales for 18/19 for the week ending April 25 were a marketing year low 4.5 mb, but total commitments of 936 mb are up 8.6% from last year. Export shipments of 20.4 mb make total shipments equal to last year. DTN's National HRW index closed at $3.85, and the average basis is at 15 cents under July.

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

FollowDanaon Twitter@mantini_r

(KR)

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Dana Mantini