DTN Early Word Grains

Grains Higher as Wet Weather Persists, Delays Extend

6:00 a.m. CME Globex:

July corn is up 1 3/4 cents per bushel, July soybeans are up 1/2 cent, and July K.C. wheat is up 5 3/4 cents.

CME Globex Recap:

Weaker equity markets around the globe Thursday morning as trade war fears persist and a slew of weak economic data out of Europe was released overnight. Weak energy markets are not supportive either as crude oil hits the lowest price overnight since early May as U.S. stockpiles are now the highest since July of 2017. Ag markets on the other hand are higher across the board Thursday morning, led by wheat, as fears persist over a loss of yield and quality in the southern plains and mid-south. Additional rains are moving across the central and Eastern Corn Belt Thursday morning with multiple rounds expected from one end of the Corn Belt to the other through the Memorial Day weekend. Minimal planting progress is expected which could produce even larger deficits relative to average on next week's crop progress reports.

OUTSIDE MARKETS:

Previous closes on Wednesday showed the Dow Jones Industrial Average down 100.72 at 25,776.61 and the S&P 500 down 8.09 at 2,864.36 while the 10-Year Treasury yield ended at 2.393%. Early Thursday, the June DJIA futures are down 250 points. Asian markets are lower with Japan's Nikkei 225 down 132.23 (-0.62%) and China's Shanghai Composite down 39.19 points (-1.36%). European markets are lower with London's FTSE 100 down 95.29 points (-1.3%), Germany's DAX down 217.07 points (-1.78%) and France's CAC 40 down 89.66 points (-1.67%). The June Euro is down 0.003 at 1.120 and the June U.S. dollar index is up 0.209 at 98.090. The June 30-Year T-Bond is up 21/32nds, while June gold is up $1.30 at $1,275.50 and July crude oil is down $1.04 at $60.38. Soybeans on China's Dalian Exchange were down -0.11% while soybean meal was down -0.07%.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

BULL BEAR
1) Weekly ethanol production surged to the highest level of the marketing year last week and hit the level needed to achieve the USDA forecast for the first time since December. 1) Weekly ethanol stocks saw the largest week-to-week gain in more than two years with total stocks now at 23.404 million barrels.
2) Dryness in parts of the Volga Valley in Russia are being discussed as limiting upside potential of the country's wheat production. 2) The rally in futures has pushed U.S. HRW FOB offers back to even money with German and Baltic wheat and a $20/metric ton (mt) premium to Russian.
3) Board soybean crush margins remain strong with all contracts above $1.00 per bushel through March of 2021. 3) Due to the rally in corn futures and the weakness in the Brazilian real, corn prices in Brazil are now the highest since September 2015.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn prices are trading a bit firmer Thursday morning and would be attempting to close higher for the ninth straight session. Unfortunately, July corn has several gaps left below the market which could act as magnets on any set back attempt. However, July corn also remains well above the 50, 100 and 200-day moving averages which will keep trend-following funds apt to cover short positions. The slowdown in the rally is being confirmed by multiple technical factors including peaking volatility, peaking on-balance-volume and easing momentum indicators which have finally stopped climbing. To be clear, price is not reflecting a bearish divergence with any of these indicators, simply that the rate of ascent has slowed and a more two-sided trade could be ahead. Weekly ethanol production bounced back strongly last week to 1.071 million barrels per day, up 20,000 on the week. This was the strongest production total since August and finally hit the level needed to achieve the USDA forecast for the first time in 17 weeks. Ethanol stocks rose sharply, however, up 1.154 million barrels on the week to 23.404 million barrels. This was the largest weekly increase in more than two years and pushed stocks back to a record level for this week of the year. More wet weather ahead for the Corn Belt with little planting progress expected until the middle of next week. Many locations hit final plant dates for insurance purposes on Saturday, May 25.

SOYBEANS Soybeans are trading slightly higher Thursday morning, continuing the choppy nature of the last 7-10 days. July soybeans had closed in the opposite direction of the previous session for the last five days, highlighting the indecisive nature of traders at the moment. Between the planting delays across the Corn Belt, along with the uncertainty regarding any possible Market Facilitation Payment (MFP), producers aren't sure how to view the soybean market. Regardless of whether producers like or dislike a second round of MFP payments, the market clearly does not like the idea as the SX9/CZ9 new crop ratio fell to 2.07 this week which is a new contract low. Anecdotal reports from the country suggest producers will continue planting corn after final plant dates have come and gone which could limit the shift in acres to soybeans that some have been touting. There seems to be no doubt soybean acres will be above the March Prospective Plantings figure which will keep 2019/20 carryout ideas at or above 1.00 billion bushels (bb). Fortunately, depressed soybean prices are supporting crush spreads with all contracts above $1.00 through March of 2021. In fact, all but one contract in 2019 is above $1.20 per bushel.

WHEAT Wheat contracts are posting solid gains Thursday morning across all three wheat exchanges, continuing the late recovery witnessed Wednesday. Still plenty of concern about the quality of this year's HRW and SRW crops as rain continues to fall on flowering wheat. We also continue to monitor the spring wheat situation in the Northern Plains with a sizable reduction in acres from the March Prospective Plantings report likely forthcoming. On the May WASDE, the USDA said we will carryout 313 million bushels (mb) of spring wheat which would be the largest since 1987/88. We think it is conceivable one million acres could be lost from the March acreage report, but total supplies would still be in excess of 900 mb for the first time since 1987/88. The only way to get total supplies back down to the 5-year average would be a national average yield of 37 bushels per acre which would be the lowest national yield since 2011/12. For reference, the drought two years ago produced an average yield of 39.8 bushels per acre and this year is set up quite a bitter from a moisture standpoint. The U.S. would need the largest spring wheat demand base since 2010/11 in order to bring ending stocks below 300 million bushels if yield stays at trend of 46 bushels per acre. The point here is the spring wheat balance sheet can lose a million acres and still not present tightness unless yield is impacted materially this summer.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.68 $0.00 -$0.27 Jul -$0.001
Soybeans: $7.46 $0.06 -$0.83 Jul -$0.001
SRW Wheat: $4.48 -$0.05 -$0.25 Jul $0.008
HRW Wheat: $4.17 -$0.04 -$0.15 Jul -$0.002
HRS Wheat: $5.00 $0.01 -$0.44 Jul $0.000

Tregg Cronin can be reached at tmcronin31@gmail.com

Tregg can be followed throughout the day on Twitter @5thWave_tcronin

(KR)

P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]
P[R1] D[300x250] M[300x250] OOP[F] ADUNIT[] T[]
P[R2] D[300x250] M[320x50] OOP[F] ADUNIT[] T[]
DIM[1x3] LBL[] SEL[] IDX[] TMPL[standalone] T[]
P[R3] D[300x250] M[0x0] OOP[F] ADUNIT[] T[]