DTN Early Word Grains
Grains Posting Modest Gains in Overnight Reversal
July corn is up 2 1/2 cents per bushel, July soybeans are up 1/4 cent, and July K.C. wheat is up 1 cent.
CME Globex Recap:Equity markets are rather soft overnight with weak unemployment data overnight from Germany. However, for the first time in a long time, the focus is on Ag commodities with the level of volatility surging in the last couple of weeks. Grains are sharply higher again overnight with 12-month highs being set in corn futures while soybeans and wheat rise to multi-month levels. Some truly dire balance sheets are being floated with ideas demand rationing could approach 1 billion bushels (bb) helping to stoke the flames. We believe farmers will continue to plant well into June at these price levels but the market will need ideal weather the rest of the summer to achieve an adequate yield. Producer selling has slowed to a crawl as often happens in times of panic. As of the last Commitments of Traders Data, there still existed plenty of net short positions across the grain room, leaving plenty of fuel for the fire.
OUTSIDE MARKETS:Previous closes on Wednesday showed the Dow Jones Industrial Average down 221.36 at 25,126.41 and the S&P 500 down 19.37 at 2,802.39 while the 10-Year Treasury yield ended at 2.236%. Early Thursday, the June DJIA futures are up 72 points. Asian markets are lower with Japan's Nikkei 225 down 60.84 (-0.29%) and China's Shanghai Composite down 8.89 points (-0.31%). European markets are higher with London's FTSE 100 up 28.8 points (0.4%), Germany's DAX up 68.98 points (0.57%) and France's CAC 40 up 20.15 points (0.39%). The June Euro is up 0.000 at 1.120 and the June U.S. dollar index is down 0.020 at 98.015. The June 30-Year T-Bond is down 12/32nds, while June gold is down $5.50 at $1,275.50 and July crude oil is up $0.15 at $58.96. Soybeans on China's Dalian Exchange were down -0.52% while soybean meal was up 0.1%.
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| BULL | BEAR | ||
| 1) | Deliverable stocks of Chicago wheat fell 1.192 million bushels (mb) last week to 35.751 mb, down 38% from a year ago. | 1) | NOAA's Climate Prediction Center is predicting above normal temperatures and below normal precipitation in the 6-10 and 8-14 day outlook for the Midwest. |
| 2) | Additional precipitation of 0.50-1.75" is forecast to fall in the Southern/Central Plains and the central/east corn belt the next 7-days. | 2) | South American FOB corn offers are trading an $11-23 per metric ton (mt) discount to U.S. Gulf offers for July. |
| 3) | Before reversing, spot ethanol prices traded to the highest level since September of 2017 on Wednesday. | 3) | In what should come as no surprise, open interest in $5.00 December '19 calls has surged to 35,900 contracts, the highest of any strike level. |
CORN Corn prices are slightly higher overnight, attempting to bounce from Wednesday's huge reversal. After December corn jumped through the $4.50 level, bulls were unable to hold that psychologically important level with a close almost 20 cents off the intra-day high. While few think the late-planting issuesare solved, weather forecasts are turning a bit more favorable, opening the idea some late acres could be shoved in during the next several days. All market participants are cognizant of the final plant dates coming and going across the Corn Belt the next 7-10 days, but few know how the farmer will react to the decision of taking prevented planting, planting late with potential yield drag, possible Market Facilitation Payments and an ongoing trade war. The choices in front of the U.S. farmer have never been murkier, especially when conditions simply will not allow some to plant. While we feel the market is still trying to get a handle on acreage, many have already moved on to yield and demand. Balance sheet scenarios are all the rage on social media but do little good with short-term price direction. As we discussed last week, there is an additional 1.4 billion bushels (bb) of supply in Argentina, Brazil and Ukraine this year vs. last. The market narrative is in its infancy but that has not stopped producers from trying to guess the price in the ninth inning.
SOYBEANS Soybeans are bouncing slightly this morning, attempting to retain Wednesday's one-month highs. Like corn and wheat, soybeans now have several gaps below the market which could act as magnets on any further weakness. Unfortunately, July beans were not able to hold above the 50-day moving average which could keep funds from getting too concerned with their net-short position. Based on our reading of the Commitments of Traders data, the weighted-average short position held by funds going back to February is 8.99 basis July futures. With the overnight selloff, prices are more than 30 cents away from that level which should leave funds feeling confident in their position. The analyst community is split on whether soybeans have already gained acreage from the March USDA report figure of 84.6 million, or whether soybean planted acreage is in jeopardy the way corn acreage is. With the longer final plant dates available for soybeans, along with what looks to be a warmer and drier forecast, soybeans should have no issue achieving the necessary acreage. China's Dalian markets got in on the fun finally with their spot soybean contract trading to the highest level since October on Wednesday while meal is at the highest level since December.
WHEAT Wheat prices rebounded from overnight losses to post slight gains as the evening session comes to a close. Rain forecasts do not look particularly well for Oklahoma, Kansas and north Texas in the next seven days. The latest GFS model sees 0.50-2.00" for all three states by the weekend and early next week. While substantial yield loss due to heavy rain still seems suspect, quality considerations are growing louder. Kansas looks set to have received the highest amount of rain during the month of May on record. Fortunately, as of the last deliverable stocks report, Kansas City wheat had 92.238 mb in deliverable warehouses. This will add a substantial buffer and quality blending stock to the situation. A huge swath of Saskatchewan is running severe moisture deficits over the last 30-days and remains an issue to monitor as planting comes to a close. If a low protein scenario develops in the southern plains, and Canada ends up producing a sub-trend crop, protein wheat could be in high demand. Add in a likely drop in U.S. HRS planted acres and clearing up the burdensome supplies of HRS might not be as difficult as it once appeared. Total supplies of SRW are forecast at the lowest since 2005/06 with that class of wheat also worth watching as rains continue to pound the SRW belt.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.91 | -$0.02 | -$0.27 | Jul | $0.000 |
| Soybeans: | $7.90 | $0.16 | -$0.82 | Jul | $0.003 |
| SRW Wheat: | $4.68 | -$0.12 | -$0.23 | Jul | $0.021 |
| HRW Wheat: | $4.36 | -$0.07 | -$0.17 | Jul | $0.001 |
| HRS Wheat: | $5.03 | -$0.09 | -$0.45 | Jul | -$0.007 |
Tregg Cronin can be reached at tmcronin31@gmail.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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