DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are up 36 points, July crude oil is up 50 cents per barrel, the U.S. dollar index is up 0.0510, and June gold is down $6.20 per ounce.

Other Markets:

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

Corn:

The parabolic rise in corn continues following the long Memorial Day weekend as corn has again gapped higher, with July now up 72 cents per bushel since May 13, and December up 65 cents. A very wet long weekend, especially in parts of Nebraska, Minnesota, Iowa and Illinois, and the forecast for the wet pattern to extend another week or more has increased the chance that significant corn acreage never gets planted. Funds have driven much of this meteoric rise, covering shorts, as the managed funds were said to have bought in 170,000 contracts in the past week through Tuesday, and likely a lot more between Tuesday and the Monday night Globex session. Managed funds as of last Tuesday were still 117,000 contracts short, but are likely long to begin this week. Old and new crop corn futures have blown through some significant resistance on the way, with the possibility now that July corn could ascend to the $4.18 level. The market remains extremely overbought, but setbacks will be difficult without a weather change. South American farmers are waiting to take advantage with the sharp fall in Brazilian real currency, making this the highest corn price Brazilian farmers have seen since 2012. Many analysts who just last week figured the prevented planting option to be around 4 million acres, now see a record 10 million acres as a real possibility. The 6-10 day weather forecast does show a bit warmer and drier forecast. Expectations for Tuesday's delayed crop progress report are to show a planting pace of 59% to 65% done versus 49% last week and a 91% 5-year average. There is some thought that we could see up to 38 million acres of corn planted in June this year, along with the yield drag associated with such late planting. Cattle on Feed on Friday revealed a record 11.818 million head on feed, the largest ever for May 1. DTN's National Corn Index closed at $3.77 on Friday, with an average basis of 27 cents under July.

Soybeans:

Soybeans have been the laggard on this fund and weather-inspired rally, but that may all change soon as we get closer to June. Managed funds in the past week through Tuesday bought in just 19,700 contracts of their record net-short, and as of Tuesday remained short a large 157,000 contracts. Tuesday morning's higher opening saw November beans gapped above what appears to be a bullish flag chart pattern. A solid close above the flag would suggest a minimum rally to the $8.90 area on November. Fundamentally, soybeans do not have as compelling a story as corn, with record U.S. and world supplies, a falling real, a still stagnant U.S.-China trade discussion, and the unabated spread of African swine fever and resulting loss of demand. However, with the forecast still very wet and a soybean planting pace that is estimated to be around 30% to 35% done when Tuesday's crop progress report comes out, funds may accelerate their short-covering on soybeans, meal and oil. The bean oil short to begin the week is estimated to be close to 70,000 contracts, with the meal short close to 40,000 contracts. There is plenty of firepower in the soy complex should the heavily short funds get cold (or wet) feet. There seems to be more of a feeling that unplanted corn is more likely to go into prevented planting rather than to soybeans, as the PP date for corn was May 25 in many areas. As President Trump finished up a visit to Japan, he had stated that the U.S. was not ready to make a deal with China, but also alluded to a great trade deal being done with China at some point. Farmers and traders are awaiting more clarification on the recent second farmer aid package. Look for major resistance on July soybeans up around $8.75, and on new crop November up around $8.90. Both the 11-15 day and 16-30 day forecasts hold out some hope for a warmer and drier trend, which should help soy planting. DTN's National Soybean Index closed at $7.47, and reflects an average basis of 83 cents under July.

Wheat:

Wheat is skyrocketing this morning on continued severe weather having an impact not only soft red wheat areas, but Texas, Oklahoma and Kansas hard red winter (HRW) wheat just ahead of harvest. Heavy rain, high winds and big hail continue to pound mature wheat, leading to fears of both quantity and quality loss, with vomitoxin a big threat, as well as the prospect for a lower protein crop. On Tuesday morning, both Chicago and Kansas City wheat futures gapped higher, with Chicago July now up 90 cents and Kansas City up 80 cents per bushel just since May 13. Managed funds covered part of their net-short through last Tuesday, but remained short around 40,000 Chicago contracts and a still huge 48,000 Kansas City contracts. There is no doubt that they continued to reel in that short through Monday night's session. Excess rains look to continue into June, and especially having an impact on Oklahoma, Kansas, Missouri and Illinois. Also adding to wheat strength is heat and dryness in parts of the Canadian Prairies and in the Volga region of southern Russia. Also, in New South Wales (a big producing area in Australia) a water restriction has been imposed due to drought, which has hampered wheat production the last few years. Australia last week was said to have purchased another two vessels of Canadian wheat to import. APK-Inform, a consultancy, has increased Ukraine wheat production by 8.5% to 25.9 million metric tons (mmt), and the EU Commission just raised EU wheat to 143.8 mmt from 141.3 mmt previously, so competition for U.S. wheat exports remains stout. Spring wheat planting in the U.S. is still an issue with the extreme weather with many in the trade figuring that close to one million acres may not get planted. DTN's National HRW index closed at $4.25, and the average basis is at 17 cents under July.

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

FollowDana on Twitter @mantini_r

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