DTN Before The Bell Grains

After Overnight Weakness, Grains Slightly Higher, Soybeans Crumble

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Dow futures are down 224 points, July crude oil is down $1.36 per barrel on a much higher than expected inventory, the U.S. dollar index is up 0.0730, and June gold is up $6.90 an ounce.

Other Markets:

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

Corn:

While corn's recent sharp ascent is showing signs of slowing, with the past three days showing weakness overnight and more sideways trade, the ongoing and impending weather forecasts suggests little change in the seeding challenge. New crop December corn has been leading the way for the past two days and is just below what should be major resistance at $4.15-$4.18. Estimates of how much of the intended corn acreage for March will be lost to either soybeans or prevented planting continue to escalate. Predictions on Wednesday from various media sources suggested that the total could range from 3 million to 10 million acres. Of course, the latter would be a game changer for supply and demand. Funds have covered a good portion of their net-short, but commission house fund watchers still have funds short a combined 160,000 contracts, including options to begin Thursday. Ethanol production was surprisingly high last week at 315 million gallons, up 2%, while ethanol inventory rose by 5.2% to 23.4 million gallons. The amount of corn or sorghum used for ethanol last week was equivalent to 112 million bushels (mb). China is back selling reserve corn stocks, selling 3.6 million metric tons (mmt) on Thursday. China pork imports for April surged to 136,517 metric tons (mt), up 24% from the previous year with year-to-date imports of nearly 471,000 mt, an 8 1/2% gain over the previous year. Weather is still very wet, with above normal rains slated for the central U.S. Parts of Kansas, Nebraska, Missouri and Iowa could see 3" to 7" totals, while Illinois and Wisconsin could get 3-4". Corn planting, which as of Sunday was the slowest pace in history, will continue to lag. The $3.99 to $4.00 area should continue to be resistance on July corn, but a rally and close above would be positive. Corn export sales for the week ended May 16 were 17.4 mb for 18/19, bringing total commitments to 1.864 bb, down 11% versus a year ago (bearish). Corn shipments of 34.6 mb fell short of the 44.6 mb needed weekly to reach the 2.300 billion bushel (bb) USDA projection. DTN's National Corn Index closed at $3.68 on Wednesday, with an average basis of 26 cents under July.

Soybeans:

For the seventh straight trading session both July and November soybeans have bumped up against, but failed to close above, the 20-day moving average, and sold off late in the overnight. The trade is anxiously awaiting clarification of rumors that a new farmer aid package could be announced on Thursday sometime. Rumors suggest a $15 to $20 billion package including direct payments on soybeans, wheat and corn. The expectation is that it would be based on last year's production so as not to influence ongoing planting decisions. This is contrary to thoughts on Tuesday that it could be tied to 2019 planting. The jury is still out and no one knows. Funds are estimated to have bought 7,000 soybean contracts on Wednesday, and fund watchers still have managed funds net-short close to 160,000 soybean contracts. A daily soybean sale was reported on Wednesday, the first sale in quite some time. The U.S. sold 110,000 mt of 18/19 soybeans to unknown and another 21,000 mt for 19/20 to unknown. There is no further news regarding U.S.-China trade talks. Soybeans have been reluctant to follow the wheat and corn rally step for step as fears of additional soy acres, lagging demand and an overwhelming supply have given funds little reason to cover. The more that soybeans bump up against the 20-day average makes it more likely that once they rally above, we could see a bounce to the next resistance zone, which is 30-40 cents higher. Both old and new crop bean futures remain 30 cents above the contract lows set just 10 days ago. U.S. soybean sales were 19.4 mb last week, bringing total commitments to 1.682 bb, down 17% from a year ago and bearish. Shipments were 21 mb, and that falls short of the 31.8 mb weekly needed to reach 1.775 bb projected by USDA. DTN's National Soybean Index closed at $7.46, and reflects an average basis of 83 cents under July.

Wheat:

All three wheat markets are again higher as extremely wet weather has raised fears of quality and quantity issues for both soft red (SRW) and hard red winter (HRW) wheat, and increased ideas of lost spring wheat acres. Rains of 4" to 6" have recently fallen over the central and northern Plains, with the heaviest in Oklahoma, Kansas and Missouri. Nebraska and South Dakota have received 2-3", with weekend rains expected to be heavy again, with 2" rains likely heaviest in parts of Missouri, Iowa and Illinois. In HRW areas, fears of lodging, hail damage and disease are on the increase despite last week's condition report showing the best in years. Some HRW areas have received as much as 7-10" rain totals in the past week just ahead of harvest. Ideas of lost spring wheat acres, which last week were 400,000 acres, are also on the rise, with some speculating that as much as 1 million acres of March intentions may not get planted. Funds, which have been reeling in some of their wheat short, are still estimated to be short near 60-70,000 in Chicago with estimates including options up close to 100,000 still. All three wheat markets are trading above long-term moving averages, and significant resistance is well above Thursday's price level. U.S. wheat export sales for the week ending May 16 were just 1.8 mb for 18/19, with 12.7 mb for 19/20. Total commitments of 945 mb are up 8% versus last year. Wheat shipments were 34.2 mb and above the 23.9 mb needed each week to reach the 925 mb USDA projection. DTN's National HRW index closed at $4.17, 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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Dana Mantini