DTN Early Word Grains
Grains Sharply Higher as Quality Concerns, Planting Support
July corn is up 5 cents per bushel, July soybeans are up 7 cents, and July K.C. wheat is up 12 3/4 cents.
CME Globex Recap:Global equity markets are mixed to weaker Monday morning as investors refocus on the trade rift between the U.S. and China after a weekend of mostly disheartening commentary related to a trade deal. The U.S. moved forward with plans to blacklist Chinese-telecomm giant Huawai and essentially any country which does business with the company. This is not slowing grains down, however, as all contracts are sharply higher overnight led by Kansas City Wheat. The speculative sector is still heavily short our space, providing upside momentum as more of their positions end up below spot prices. It has been several years since a major prevent plant event took place and it would appear that is exactly what the market has on its hands this year.
OUTSIDE MARKETS:Previous closes on Friday showed the Dow Jones Industrial Average down 98.68 at 25,764.00 and the S&P 500 down 16.79 at 2,876.32 while the 10-Year Treasury yield ended at 2.393%. Early Monday, the June DJIA futures are down 26 points. Asian markets are mixed with Japan's Nikkei 225 up 51.64 (0.24%) and China's Shanghai Composite down 11.69 points (-0.41%). European markets are lower with London's FTSE 100 down 34.78 points (-0.47%), Germany's DAX down 73.26 points (-0.6%) and France's CAC 40 down 41.75 points (-0.77%). The June Euro is up 0.000 at 1.120 and the June U.S. dollar index is down 0.049 at 97.775. The June 30-Year T-Bond is down 3/32nds, while June gold is down $1.70 at $1,274.00 and June crude oil is up $0.29 at $63.05. Soybeans on China's Dalian Exchange were up 1.17% while soybean meal was up 1.14%.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
| BULL | BEAR | ||
| 1) | Trade estimates for planting progress expect corn, soybean and spring wheat to lag averages by 33%, 15% and 16%, respectively. | 1) | NOPA crush for April was 159.9 million bushels (mb) vs. the average trade guess of 161.6 mb, 170.0 mb last month and 161.0 mb last year. |
| 2) | Morning GFS models are putting 1.00-4.00" rain totals across a majority of the Plains and Midwest, raising wheat disease prospects and delaying planting further. | 2) | Russian Ag consultancy IKAR raised their estimate of the Russian wheat crop to 81 million metric tons (mmt) vs. USDA at 77 mmt. |
| 3) | Managed funds increased their record net-short position in soybeans by another 9,054 contracts to 177,035 contracts. | 3) | The spread between spot month Paris milling wheat futures and Kansas City wheat dropped to its smallest premium since September as European and Black Sea prices did not follow the U.S. rally last week. |
CORN Corn futures are sharply higher Monday morning following another Sunday night gap up with spot futures attempting to close higher for the sixth session in a row. Weekend rainfall across the Corn Belt stalled planters with morning GFS models calling for additional precipitation during the coming seven days. South Dakota, North Dakota, Minnesota, Illinois, Indiana, Ohio and Wisconsin are the real trouble spots with all of the aforementioned lagging average progress by 30-50% as of last week. With little progress expected to be made in the coming week, it is conceivable the United States' second largest corn producing state could see over half of its crop planted more than a month late. Analysts are now busy projecting how many corn acres we could lose to prevent plant and soybeans with estimates ranging from two to seven million. One thing to keep in mind is any supply reduction will be met with a nearly identical demand reduction, especially in a year which features burdensome supplies at most major exporting countries. A major drop in corn acres is not currently reflected in futures prices but the market also doesn't need to price every bushel of reduction in during one week. There is still a lot of old crop corn left to move off the farm which is expected to be sold on a further rally. Last week, funds bought 9,424 contracts to put them net short 291,742 contracts. Nearly all of the gross fund short positions put on since February 12 is thought to be underwater with July futures above $3.86.
SOYBEANS Soybeans prices are firmer, rallying in sympathy with corn even though any meaningful shift away from corn acres should go to soybeans. The entire Corn Belt and fringe areas have until June 5 to plant soybeans while Iowa, southern Wisconsin, Michigan, northern Illinois and the northern quarter of Kansas have until June 15. Areas to the south of that have until June 25-30, providing ample time to seed the legume, although soybeans being a daylight sensitive crop will obviously suffer yield drag if seed doesn't go into the ground until mid-June. Political chatter surrounding the trade talks did not sound positive this weekend with both sides seemingly digging in their heels. With estimates of African Swine Fever still climbing, would seem USDA's recent forecast of Chinese soybean imports have downside risk. April NOPA crush totaled 159.99 mb vs. the average trade guess of 161.6 mb, 170.0 mb last month and 161.0 mb last year. This marks the third consecutive month in which NOPA crush did not set a new all-time record. Crush needs to run exactly in-line with last year in order to meet the USDA's forecast which could be a tall ask. Funds pushed their net short in soybeans to a new record last week but commercial activity was conspicuously absent.
WHEAT Wheat prices have joined in the overnight party with Kansas City wheat leading the way higher as several more rounds of heavy rain are expected to impact the U.S.'s largest producing state. The U.S. HRW crop has reached a point where additional moisture is not necessarily going to lead to additional bushels and could actually cut bushels by way of lodging and disease. In addition, excess moisture at heading and flowering can increase the risk of fusarium head blight, the disease responsible for vomotoxin. As if the U.S. needed another reason to be uncompetitive in the world wheat market, a slug of high vomotoxin wheat could push global importers to other origins. Spring wheat progress will be delayed again this week as South Dakota was hit with rain and North Dakota with snow. All areas of South Dakota have passed the final plant date while southern North Dakota has until May 31. The U.S. HRS balance sheet is more than comfortable, even if acreage does decline precipitously from the March USDA estimates. The rally in U.S. wheat futures has pushed our FOB offers sharply higher than Russia, Germany and Baltic States, signaling the concern with U.S. exporters about getting business on. Black Sea crop estimates appear to be creeping higher and Canadian spring wheat planting progress is at or ahead of average pace.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.58 | $0.04 | -$0.25 | Jul | -$0.005 |
| Soybeans: | $7.39 | -$0.18 | -$0.83 | Jul | $0.004 |
| SRW Wheat: | $4.39 | -$0.01 | -$0.26 | Jul | $0.007 |
| HRW Wheat: | $4.05 | $0.04 | -$0.15 | Jul | $0.004 |
| HRS Wheat: | $4.85 | $0.01 | -$0.43 | Jul | $0.000 |
Tregg Cronin can be reached at tmcronin31@gmail.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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