DTN Before The Bell Grains

Morning CME Globex Update:

Following Tuesday's 207-point gain in the Dow Jones average, Dow futures are down 181 points again early Wednesday. June crude oil is down 69 cents per barrel, the U.S. dollar index is up 0.1560, and June gold is up $4.70 per ounce.

Other Markets:

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

Corn:

Corn futures are sharply higher to begin this Wednesday morning, with July blasting through the 50-day moving average and now 35 cents above the new contract low set on Monday. Funds are undoubtedly covering part of their still large net-short, estimated to be 315,000 contracts to begin Tuesday night's overnight session. While President Trump continues to insist that China really wants a trade deal, even after raising tariffs on China again, trade has become tired of the talk. Focus has shifted to the plight of corn farmers trying to get this crop in the ground. With last week's meager gain of 7% in seeding, and one of the lowest weekly totals on record, there remains 70% of the corn crop left to plant beyond the optimal date of May 10. Weather on Wednesday features a warmer and mostly drier forecast, with radar showing some rains in parts of Missouri and southern Illinois, but clear in most other areas. The 7-day forecast in much of the Corn Belt is wet beginning this weekend, and rain totals of 2-4" are expected to be widespread, hindering planting efforts even more and accelerating talk of more prevent plant acres. This year's pace is being compared to 2013, when corn prevent plant was 3.6 million acres. Private analysts have already begun to slash corn acreage, from the hefty 92.8 million acres that USDA used to 2-3 million acres lower, with yield likely to fall below the 176 bushel per acre trend. The market has come to realize that rather than the surprising 2.485 billion bushel (bb) ending stocks USDA used last week, carryout could fall closer to 1.9 to 2 bb if current wet forecasts verify. Each one million acres dropped would equate to a loss of 170 million bushels (mb) or more. The extent of the massive fund short could easily rally this market quite a bit more, but waiting in the wings are South American farmers, who look to produce a combined huge 150 million metric tons (mmt) (5.9 bb) of corn this year. The next level of resistance on July corn will be $3.80-$3.81. DTN's National Corn Index closed at $3.44 on Tuesday, with an average basis of 25 cents under July.

Soybeans:

Soybeans are also rallying again, and July is now 51 cents above the new contract low set on Monday morning. Funds coming into Wednesday are thought to be still short a hefty 175,000 contracts of soybean futures. Funds are estimated to have bought 13,000 soybean contracts and 7,000 soy meal contracts on Tuesday. Even though the soy planting delay is not nearly as pressing as corn, the 9% planting pace is well behind the normal pace of 29%, and the forecast ahead promises more seeding challenges. Following what the Trump administration insists was China backpedaling on several agreed to concessions on the proposed trade deal, President Trump raised tariffs again on China to pressure them. The next meeting is unlikely to be before the G20 summit in Japan around the end of June. The President insists that China does want a deal, but U.S. soybean demand continues to suffer. African swine fever will not go away and the demand implications from that disease continue to grow. China's sow herd was said to be down 22.3% in April compared to a year earlier following a decline of 21% in March. Rabobank suggests that China's pork production could fall 35% in 2019. Brazil's soybean basis has risen dramatically making U.S. soybeans much more competitive to most destinations except for China. In the absence of a trade deal with China, President Trump has promised aid to U.S. soybean farmers again, amounting to $15 billion. Both July and November soybeans have now filled the open chart gap left on May 3, but with a U.S. ending stocks number that could well rise above one billion bushels, and huge South American soy crops, the upside is likely to be more limited than corn. DTN's National Soybean Index closed at $7.47, and reflects an average basis of 85 cents under July

Wheat:

Kansas City July wheat has now rallied 35 cents above the new contract low set on Monday and is going for its third consecutive higher close. As in corn and soybeans, it appears that funds, who have been heavily short wheat, and a record Kansas City short, have begun to lighten up that position. The delay in spring wheat seeding has increased talk of reduced acres, and talk of potential for fusarium disease to impact both yield and quality of the U.S. soft red crop has encouraged buying. The upside in wheat may be somewhat limited with the 1 bb carryout in the U.S. and Russian wheat values still falling. The Australian wheat crop ideas are also falling as dry conditions persist there. Earlier projections were for a 40% increase in that wheat crop from last year's drought-impacted total, but now ideas are being ratcheted down, with the latest estimate from the U.S. Ag Attache at 20 mmt. Australia also just made their first import of wheat in ten years from Canada. Algeria was said to have completed a purchase of 500,000 mt of wheat from optional origin, with hopefully some U.S. wheat involved. Ethiopia is in for another 600,000 mt of wheat. DTN's National HRW index closed at $3.93, and the average basis is at 16 centsunder July.

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

FollowDana on Twitter @mantini_r

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