DTN Early Word Grains

Grain Rally Continues Early Wednesday

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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6:00 a.m. CME Globex:

July corn is up 7 3/4 cents, July soybeans are up 10 3/4 cents and Juy KC wheat is up 5 3/4 cents.

CME Globex Recap:

Dow Jones futures are starting a little lower early Wednesday and the June U.S. dollar index is a little higher. Except for energies, most commodities are trading higher at the start of what is likely to be a quiet news day.

OUTSIDE MARKETS:

Previous closes on Tuesday showed the Dow Jones Industrial Average up 207.06 at 25532.05 and the S&P 500 up 22.54 at 2,834.41, while the 10-yr Treasury yield ended at 2.542%. Early Wednesday, DJIA futures are down 57 points. Asian markets are higher with Japan's Nikkei 225 up 121.33 (0.6%) and China's Shanghai Composite up 55.07 points (1.9%). European markets are mostly lower with London's FTSE 100 up 16.41 points (0.2%), Germany's DAX down 16.27 points (-0.1%), and France's CAC 40 down 16.10 points (-0.3%). The June Euro is unchanged at $1.124 and the June U.S. dollar index is down 0.04 at 97.28. The June 30-Year T-Bond is up 16/32nds, while June gold is up $3.00 at $1,299.30 and June crude oil is down $0.50 at $61.28. Soybeans and meal on China's Dalian Exchange were both showing small gains.

BULL BEAR
1) There are heavy rain amounts in the seven-day forecast, adding to corn planting difficulties. 1) Trade talks have come to a standstill and there has never was any breakthrough on the difficult issue of intellectual property rights -- at least that is publicly known about.
2) Weekly stochastic indicators are turning higher for corn and winter wheat after challenging multi-year support levels. 2) U.S. ending soybean stocks are at risk of coming in above a record high 1 billion bushels (bb) for 2018-19.
3) Tuesday's rally likely prompted some short-covering, but it is corn that has the best bullish potential of the three main crops. 3) USDA's early estimate of world wheat production is for a 6% increase in 2019-20. So far, major wheat regions are reporting mostly favorable conditions.

MORE COMMODITY-SPECIFIC COMMENTS

CORN July corn is up 7 3/4 cents early Wednesday, venturing higher a third consecutive day in the face of what continues to look like difficult planting conditions in early 2019. For areas where fields are dry enough, the next two days offers an opportunity for planting before rain returns to the central and western U.S. Plains this weekend and early next week. The seven-day forecast shows the heaviest totals in the Western Corn Belt, while the Eastern Corn Belt gets by with lighter amounts. The actual distribution will be important as the eastern Midwest has not shown much planting progress to date. Meanwhile the calendar pages turn and today marks the half-way point in May. Technically speaking, the upward reversal since Monday originated from the same area of support that has held corn prices since late 2014 and has potential to move higher.

SOYBEANS July soybeans are up 10 3/4 cents and July soybean meal is up $4.20 early, finding more upward momentum after Tuesday's big gains. President Donald Trump continues to insist China wants to make a deal, while Chinese statements remain firm about not caving in to the pressure of new tariffs. President Trump is expected to talk with President Xi Jinping at the G20 meeting in Japan on June 28, but no official trade talks are scheduled before then. In the meantime, the pace of planting is also slow for soybeans, but not as time critical as for planting corn. U.S. soybean exports and demand in general, continue to be the source of bearish concern for soybean prices, while China hangs on to its 25% tariff on U.S. soybeans. Technically, DTN's national index of cash soybean prices bounced up from $7.18, but the overall trend remains down.

WHEAT July KC wheat is up 5 3/4 cents early Wednesday, enjoying some bullish influence from corn prices and also benefiting from light noncommercial short-covering. The seven-day forecast expects heavy rains amounts up and down the central and western U.S. Plains, starting this weekend. It wouldn't be surprising to see flooding return to some areas of eastern Kansas and Missouri, while the SRW wheat crop in the eastern Midwest enjoys welcome relief from a drier outlook. Outside of North America is where the big increases in wheat production are expected in 2019 and so far, the major regions are reporting mostly favorable conditions. Eastern Europe is one area of dry concern. Technically, weekly stochastics for winter wheat prices are turning higher, suggesting wheat has seen the low end of its trading range. The fundamental outlook however, will continue to keep bearish pressure on prices overall.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.44 $0.12 -$0.25 Jul $0.000
Soybeans: $7.47 $0.29 -$0.84 Jul $0.002
SRW Wheat: $4.21 $0.11 -$0.28 Jul -$0.001
HRW Wheat: $3.93 $0.11 -$0.15 Jul -$0.004
HRS Wheat: $4.81 $0.05 -$0.42 Jul $0.001

Todd Hultmancan be reached at todd.hultman@dtn.com

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Todd Hultman