DTN Before The Bell Grains

Morning CME Globex Update:

Thursday saw the Dow Jones average rise 214 points, and Friday's early market indicates Dow futures are down 170 points. June crude oil is up 47 cents per barrel, the U.S. dollar index is up 0.0320, and June gold is down $2.80 per ounce.

Other Markets:

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

Corn:

Corn continues its move higher with July now 40 cents above the new contract low set just five days ago. Managed money funds are scrambling to reduce some of their risk, and having bought in less than half of their once record net-short position, sending old and new crop corn futures well above the key 50-day moving average. South American farmers have met this strength with increased selling. With the China trade talks having taken a back seat, the focus now is clearly on the ongoing very wet forecast and likelihood of lost corn acres and yield, as the prospect for yield drag increases into June. Ideas of prevent plant(PP) acres are growing with each day, and some analysts speculate on a record amount of corn going into PP. Although we have had a few days of warm and dry weather overall, the 10-day forecast shows very heavy rains expected to impact the heart of the Corn Belt, bringing field activity to a halt. The trade expects that by Sunday, corn could be from 45 to 50% planted at best. Illinois is a big problem, with potentially just 20% planted by the weekend, compared to last year at 82%. For the next ten days it looks like Missouri, Illinois and Indiana could see as much as 2-5", with even heavier totals (5-7") in parts of Illinois and Missouri likely. Funds coming into Thursday's overnight trade were thought to still be short an estimated 260,000 contracts, enough firepower to propel a much more dynamic rally should they choose to exit all of that short. July corn will have significant resistance in the $3.85-$3.90 area, with new crop December likely to encounter plenty of selling from $4.00 to $4.08. Corn export sales last week were 21.8 million bushels (mb), and total sales commitments of 1.846 billion bushels (bb) compared to 2.071 bb last year. DTN's National Corn Index closed at $3.54 on Thursday, with an average basis of 25 cents under July.

Soybeans:

Soybeans are reluctant to follow this wheat and corn-led rally, but for the week, July beans are still 45 cents per bushel above the lows set on Monday. With no new trade talks scheduled in the next few weeks, China has taken a more hard line stance to the situation. Treasury Secretary Mnuchin, on the other hand, suggests that he will soon be going to Beijing for further trade talks. Trade is resigned to the idea that the next meeting may be at the G-20 summit with Presidents Xi Jinping and Trump. The Chinese equities market is reflecting disappointment, with four consecutive weeks of losses on the Shanghai Index. Funds have also been exiting a portion of their record net soybean short, but the prospect for increased soy acres as corn is delayed has made the soy rally much less dynamic. The fact that U.S. ending stocks look to end up over a record-large 1 bb with the world already awash in soybeans continues to overhang the soy market. The Buenos Aires Exchange overnight raised Argentine soy production another 1 million metric tons (mmt) to 56 mmt, with 77% of that soybean harvest now complete. Managed money funds entering Thursday's overnight session are thought to still be short 160,000 contracts of beans. U.S. soybean sales last week were a lethargic 13.6 mb, and total sales at 1.662 bb are well below last year, with 436 mb still unshipped. The fear is that without a China trade deal, they may be inclined to cancel the nearly 7 mmt (257 mb) of unshipped soybeans on the books. Although there has been less concern for soybeans, they also are well behind on planting, and soon yield concerns will emerge for beans if the forecasts verify. Soybean futures remain below the 20-day moving averages but a rally and close above $8.45 on July and $8.67 on November could lead to further gains next week. DTN's National Soybean Index closed at $7.56, and reflects an average basis of 83 cents under July

Wheat:

As in corn and soybeans, managed money funds have lightened the load on their large net-short position in wheat, with Chicago wheat leading the way higher and now up 54 cents from the new contract low established Monday. Chicago is leading the way as the soft red winter (SRW) wheat crop is suffering the most with the excess rains during the growing season and the prospect for more to come, leading to ideas of abandonment and fusarium issues. The forecast for next week in the SRW belt is for above normal temperatures, which could exacerbate the situation. In Kansas City, the record fund short is also being whittled down a bit, with KC having rallied 40 cents since early Monday. Missouri and Illinois and Indiana, prominent SRW areas, are likely to get pummeled with more rain. Minneapolis wheat is surging Friday morning as rains will further delay spring wheat planting and potentially reduce acres. Minneapolis had moved above the 50-day moving average ($5.37). While the wheat short-covering rally could certainly continue, overhanging this market is not only a burdensome U.S. wheat supply, but an all-time record large world supply. There have been plenty of wheat tenders around, with recent optional purchases by Tunisia and Algeria hopefully containing some U.S. wheat. U.S. wheat sales commitments are now 9% above a year ago, with shipments now 4% higher. DTN's National HRW index closed at $4.01, and the average basis is at 16 cents under July.

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

FollowDana on Twitter @mantini_r

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