DTN Early Word Grains

Grains Keep Leaning Higher With Wet Forecast

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

July corn is up 5 3/4 cents, July soybeans are up 5 1/4 cents and Juy KC wheat is up 6 3/4 cents.

CME Globex Recap:

Dow Jones futures are starting a little higher early Thursday, even though European markets are modestly lower. The June U.S. dollar index is quiet and most other commodities are mixed. Corn remains the bullish instigator among crop prices with serious planting challenges in May.

OUTSIDE MARKETS:

Previous closes on Wednesday showed the Dow Jones Industrial Average up 115.97 at 25,648.02 and the S&P 500 up 16.55 at 2,850.96, while the 10-yr Treasury yield ended at 2.38%. Early Thursday, DJIA futures are up 87 points. Asian markets are mixed with Japan's Nikkei 225 down 125.58 (-0.6%) and China's Shanghai Composite up 17.03 points (0.6%). European markets are lower with London's FTSE 100 down 9.36 points (-0.1%), Germany's DAX down 12.37 points (-0.1%), and France's CAC 40 down 13.85 points (-0.3%). The June Euro is unchanged at $1.124 and the June U.S. dollar index is down 0.04 at 97.33. The June 30-Year T-Bond is up 8/32nds, while June gold is down $2.00 at $1,295.80 and June crude oil is up $0.46 at $62.48. Soybeans and meal on China's Dalian Exchange were both showing modest gains.

BULL BEAR
1) The seven-day forecast continues to show a large area of heavy rain amounts, adding to row crop planting difficulties in May. 1) Trade talks with China have ceased. On the other hand, Trade Secretary Steven Mnuchin said they may be close to removing steel and aluminum tariffs for Canada and Mexico.
2) Even though fundamentals are bearish, soybean and wheat prices are near long-term lows. 2) Already anticipated at record levels, U.S. ending soybean stocks will continue to increase, while distorted by China's 25% tariff.
3) Depending on how bad the planting situation becomes, U.S. ending corn stocks have a chance to decline in 2019-20. 3) USDA's good-to-excellent crop ratings for winter wheat are at their highest in nine years.

MORE COMMODITY-SPECIFIC COMMENTS

CORN July corn is up 5 3/4 cents early Thursday, slightly above the high in April with a large area of heavy rain expected in the central and western Corn Belt the next seven days. For a region that has already encountered substantial flooding this spring and is just a week away from the time of year when corn planting typically slows, it is becoming increasingly difficult to believe that USDA's 92.8 million acre planting estimate will be possible in 2019. Thursday morning's weather map is mostly dry, except for small, spotty showers. Some planting is taking place this week, but in many areas, the fields still aren't ready and progress is apt to be limited again on Monday afternoon. Thursday morning's export sales report will give another clue about the likelihood of reaching USDA's export estimate of 2.300 billion bushels (bb). Technically speaking, July corn is possibly developing an outside bullish reversal this week, coinciding with a bullish change in the weekly stochastic.

SOYBEANS July soybeans are up 5 1/4 cents and July soybean meal is up $1.20 early Thursday, still exerting some pressure against the bearish speculative forces that have dominated prices since April. Partly helping U.S. soybean prices, Brazil's FOB price has seen large increases the past three days, presumably related to Chinese buying after trade talks with the U.S. broke down. U.S. soybeans remain off-limits to Chinese companies, but are at least more attractively priced now for non-Chinese sources. With corn planting stifled, the common view is that more soybean acres will be planted and that may be so, but given the wet forecast, it is also possible that soybean acres will also see increased prevented plantings. Fundamentally, record ending stocks of U.S. soybeans remain the main source of bearish pressure on prices and are not likely to get better without some kind of trade progress with China. Thursday's export sales numbers are expected to be less-than-needed once again.

WHEAT July KC wheat is up 6 3/4 cents early Thursday, working on the possibility of a bullish outside reversal this week after briefly dipping below the old 2016 low Monday morning. Fundamentally, it is difficult to see much potential for higher prices in wheat as world production is expected to increase in 2019 and U.S. supplies in particular seem stuck near 1 bb. It is more conceivable that this week's test of 13-year lows in July KC wheat could be the bottom of a new trading range as producer profitability is strained in this environment. The seven-day forecast of heavy rain amounts described above could present problems for both winter and spring wheat in the western Plains the next seven to ten days. SRW wheat in the eastern Midwest has already been stressed by excess moisture and is not expecting as much rain the next seven days. Technically speaking, winter wheat prices appear to be finding support near long-term lows, but bullish potential is limited.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.44 $0.01 -$0.25 Jul $0.001
Soybeans: $7.51 $0.04 -$0.84 Jul $0.000
SRW Wheat: $4.21 $0.00 -$0.28 Jul -$0.005
HRW Wheat: $3.87 -$0.06 -$0.15 Jul $0.003
HRS Wheat: $4.73 -$0.08 -$0.42 Jul $0.001

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

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Todd Hultman