DTN Early Word Grains

By Tregg Cronin
DTN Contributing Analyst

6:00 a.m. CME Globex:

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

CME Globex Recap:

Equity markets have stabilized overnight from Thursday's selloff, stoked by the deteriorating trade talks between the U.S. and China. The second Market Facilitation Payment (MFP) program was announced in part during the session Thursday with additional details released after the close. In our view, the announcement of a second program at this juncture would suggest a trade deal is nowhere close and the Administration is readying for a long, drawn-out affair. Grains are higher overnight with most contracts working on solid weekly gains. The confusion related to the second round of MFP payments along with rumors over higher prevent plant coverage is making the tea leaves especially difficult to read at the moment. The bottom line is additional moisture is on the way and final plant dates for many areas of the Corn Belt will be passed this Saturday with another tranche hitting on June 5.

OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average down 286.14 at 25,490.47 and the S&P 500 down 34.03 at 2,856.27 while the 10-Year Treasury yield ended at 2.296%. Early Friday, the June DJIA futures are up 177 points. Asian markets are mixed with Japan's Nikkei 225 down 33.92 (-0.16%) and China's Shanghai Composite up 0.48 points (0.02%). European markets are higher with London's FTSE 100 up 42.27 points (0.58%), Germany's DAX up 94.91 points (0.79%) and France's CAC 40 up 51.3 points (0.87%). The June Euro is up 0.001 at 1.120 and the June U.S. dollar index is down 0.118 at 97.605. The June 30-Year T-Bond is down 18/32nds, while June gold is down $4.60 at $1,280.80 and July crude oil is up $0.60 at $58.51. Soybeans on China's Dalian Exchange were up 0.03% while soybean meal was down -0.82%.

	BULL		BEAR
1)	Rumors circulated Thursday evening a second disaster aid package was being readied by the Administration to pay producers who could not seed ground or had losses due to flooding this spring.	1)	Corn export sales missed the level needed to hit the USDA forecast for the second time in three weeks.
2)	Soybean export sales of 19.7 million bushels (mb) were well better than the 6.9 mb needed weekly to hit the USDA forecast.	2)	The Bloomberg Commodity Index traded to the lowest level Thursday since January 3 as crude oil plunged through its 200-day moving average.
3)	China's first auction of state corn this year saw 90.7% of the total offered purchased at around $236.88 per metric ton (mt) ($6.02/bushel).	3)	The U.S. Dollar Index traded to the highest level since May 16, 2017, Thursday before reversing to close lower.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn futures are higher Friday morning following yesterday's lower close and the first down day in eight sessions. Overnight, the rumor mill was churning hard with sources close to the White House talking of raising the insurance guarantee percentage for prevented planting on corn from 55% to as much as 70-90%. If verified, it would definitely make the decision easier for producers who are struggling between prevented planting and mudding in a late crop. The decision to plant or not plant would still not be black and white as producers would have to weigh a potential Market Facilitation Payment against higher Prevented Planting coverage. The higher Prevented Planting coverage is just speculation at this juncture but it adds to an already murky operating environment for U.S. producers in 2019. Export sales in the week ended May 16 totaled 17.4 mb vs. the 29.3 mb needed to hit the USDA forecast. Commitments as a percentage of the USDA export forecast at 80.89% is the lowest for this time of year since 2001, indicating the high level of sales needed through August to achieve the USDA forecast. Shipments are also a concern at 64.73% of the USDA's export forecast, above the 57.79% from last year but the third lowest of the last 19 years. The competition from Argentina, Brazil and Ukraine should be present the rest of the calendar year.

SOYBEANS Soybeans are higher Friday morning, sitting inside Thursday's session but well off the previous day's close. Soybean traders are as confused as anyone as to the events of the last 24-36 hours. Ideas of big MFP payments were mostly struck down Thursday with reports producers would receive a non-specific payment rate based on acres actually planted in 2019. Other reports suggested there would not be a payment rate on any crop, but rather a county-wide payment which would end up being similar to last year. Presumably, the first payment would come after acreage certification in July but rounds two and three of this second MFP payment are to-be-determined. Export sales last week totaled 19.6 mb vs. the 6.2 mb needed weekly to hit the USDA forecast. Export sales are not the issue, but rather, a slow export pace due to river logistics. At 70.24%, the shipments as a percentage of the USDA forecast are at the lowest on record going back to 2000. There would need to be 35.2 mb of soybean exports every week to achieve the USDA forecast, 4.6 mb above the previous record pace from a year ago. Regardless of what program ends up being announced, we still feel soybeans will take the brunt of the price declines due to an oversupplied balance sheet with additional new crop on the way.

WHEAT Wheat markets are higher as prices remain inside Thursday's rather wide range More importantly, markets are working on their second higher weekly close in a row. As with corn and soybeans, wheat traders spent much of the day trying to decipher the press reports from Washington D.C., and the impact on marketing decisions. Obviously, the discussion for wheat is much different than it is for corn and soybeans as both winter and spring wheat acres are already in the ground. Still, there is likely to be a fair amount of prevented planting in South Dakota and southern North Dakota. Heavy rains are still forecast for northern Texas, Oklahoma, Kansas and Missouri the next seven days, having an impact on heading and flowering. The timing of these rains with respect to the stage the winter wheat is in could not be worse for avoiding a vomitoxin and test weight issue. Wheat export sales last week totaled 1.8 mb for old crop and 12.7 mb for new crop. New crop commitments of 122.1 mb are solid and 137% above the same timeframe a year ago. That said, global wheat prices have not followed U.S. prices to the same degree on this rally. In the process, U.S. HRW has pushed itself back to a premium against Russian, German and Baltic wheat on a FOB basis for all available slots. It is rather telling that U.S. wheat is not fighting for export business during its harvest slot and would appear to be focusing on second half export business once the bulk of the EU/FSU exportable surplus has been shipped.

	DTN Cash	Change From	National	Contract	Change from
Commodity	Index	Prev Day	Avg. Basis	Month	Prev Day
Corn:	$3.63	-$0.05	-$0.27	Jul	-$0.001
Soybeans:	$7.39	-$0.07	-$0.82	Jul	$0.002
SRW Wheat:	$4.46	-$0.02	-$0.25	Jul	$0.004
HRW Wheat:	$4.10	-$0.07	-$0.16	Jul	$0.000
HRS Wheat:	$4.91	-$0.09	-$0.43	Jul	$0.002

Tregg Cronin can be reached at tmcronin31@gmail.com

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

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