DTN Before The Bell Grains

Morning CME Globex Update:

After Tuesday's 197-point rally in the Dow Jones average, Dow Jones futures are down 93 points Wednesday morning. July crude oil is down 92 cents per barrel, the U.S. dollar index is down 0.0520, and June gold is up $3.60 an ounce.

Other Markets:

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

Corn:

Although the slowest planting pace on corn in history (49%) is surely reason for concern about both loss of yield and final acreage, the corn market has been on a parabolic rise in the last 7 trading sessions. The market was overbought technically, and Wednesday's early weakness is merely a correction of that move higher. Tuesday's Japanese candlestick spinning top formation is often a reversal pattern, but with July corn still well above key long term moving averages, and a forecast which is still too cool and wet for much seeding progress and emergence, the setback should be shallow. Look for July corn to encounter support first at the gap of $3.84 3/4, and down to $3.80 on further weakness. Driving the gains of the last week have been managed money funds exiting from what was a record net-short a week and a half ago of 344,000 contracts. There is some discrepancy by fund position watchers this morning, with estimates of Tuesday's fund buying ranging from 20,000 to 60,000 contracts. If the latter is proven to be correct when the CFTC report comes out on Friday, then funds will have covered 2/3rds of their short position, while other estimates still show the net short still closer to 180,000 contracts. Radar maps on Wednesday morning show storms moving across the Northern Plains and Iowa, Illinois and Indiana. Illinois, Indiana and Ohio remain laggards in planting progress with Illinois as of Sunday trailing the 5-year average by 58%. Indiana and Ohio at just 14% and planted, are unlikely to make much progress in the short term. As if China didn't have enough problems with African swine fever and the trade conflict, news of the dreaded armyworm in corn is said to have spread to 14 provinces there. Look for the $4.00 area on July corn and $4.15 on December corn to continue to be a strong selling area, with July on Tuesday bumping up against and being rejected by a weekly down trend line. DTN's National Corn Index closed at $3.68 on Tuesday, with an average basis of 26 cents under July.

Soybeans:

Soybeans have stabilized a bit in the overnight session following Tuesday's mid-day price plunge directly related to a Bloomberg story about a second farmer aid package being prepared by the Trump administration. The gist of the report suggested that the aid package under consideration and likely to be released as soon as Thursday would be a payment of $2.00 per bushel for soybeans, 63 cents for wheat, and just 4 cents for corn. Such a rumor sent soybeans plunging due to ideas that many more soybean acres would be incentivized if the payment were tied to 2019 planting, and also thoughts that the second tranche of aid would suggest that we are not close to a U.S.-China final trade deal. The trade will be anxiously awaiting some confirmation of the rumored aid package. The aid package under consideration was said to be designed so as not to skew 2019 planting decisions, according to Bloomberg. The jury is still out. Not getting a whole lot of attention just yet is the severe lag in soybean planting, with progress at just 19% as of Sunday compared to the average of 47%. Funds have been much less concerned with covering their soybean short, which was record large last week and is still thought to be a hefty 155,000 contracts short. Tuesday's rally above the 20-day moving average for the first time since mid-April looked like it could lead to further strength, but that was quickly rebuffed at midday. China's soy processing margins are said to have been red for six months now as the trade war raged on and demand due to swine fever lagged, but soymeal prices in China have gained 9% in the past several weeks and improved margins as meal supplies tighten there. Look for another rally above the 20-day average to lead to further gains, with major resistance well over current market levels. DTN's National Soybean Index closed at $7.40, and reflects an average basis of 82 cents under July. At 8 a.m. USDA reported 131,000 mt of soybeans sold to unknown destinations; 110,000 mt for 2018-19 delivery and 21,000 for 2019-20.

Wheat:

All three wheat futures markets are correcting in unison on Wednesday morning after the recent sharp rise, which saw Chicago and Kansas City spot month futures go 70 to 75 cents per bushel higher. Chicago July has now dropped 21 cents from the high established on Tuesday. Despite the highest winter wheat ratings in years at 66% good to excellent, recent and expected heavy rains have stoked fears of a loss in yield and quality in both soft red winter (SRW) and hard red winter (HRW) wheat, with fusarium and even vomitoxin talked about. Spring wheat planting, at 70% done was a bit better than the trade had expected, but with ongoing heavy rains and cool weather it is thought that much of the remaining 30% may not get planted until June. South Dakota is severely lagging, with just 70% in the ground compared to the 94% average. Many in the trade suspect that the spring wheat acreage decline could amount to 400,000 to 500,000 acres. Moderate to heavy rains are expected to continue in eastern Kansas and Nebraska and on into SRW growing areas, but this morning's weather updates do hint at a drier Ohio Valley and Delta. On a further break look for KC July to support at $4.23-$4.25, with Chicago July support likely at $4.65-$4.67. DTN's National HRW index closed at $4.21, and the average basis is at 15 cents under July.

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

FollowDana on Twitter @mantini_r

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