DTN Before The Bell Grains

Morning CME Globex Update:

After the Dow Jones average plummeting 355 points on Friday on U.S.-Mexico trade fears, Dow futures are again down 35 points early Monday. July crude oil is up $1.09 per barrel, the U.S. dollar index is up 0.0110, and June gold is up $10.60 per ounce.

Other Markets:

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

Corn:

Corn is again a bit lower to start Monday following Friday's 9-cent lower close on July corn. President Trump's threat to hit all Mexico imports to the U.S. with a 5% tariff beginning on June 10, gradually increasing to 25%, sent the markets reeling on Friday. The Trump administration's willingness to tie trade to the escalating border crisis has given ag markets another possible trade war to worry about. Mexico has been the number one importer of U.S. corn, taking 600 million bushels (mb) last year. The threat of retaliatory tariffs on the U.S. in response stopped the recent corn rally in its tracks, as did the drier than expected weekend in some areas of the Corn Belt. Mexico, in an effort to avoid any sort of trade war ahead of what was expected to be the ratification of the USMCA trade accord, has sent key representatives to Washington for talks with U.S. officials Monday. Both Mexico and China officials had expressed a willingness to continue to work with the U.S. on trade issues over the weekend. Not all is rosy on the planting front with the soggy Eastern Corn Belt. Illinois, Indiana and Ohio are expected to receive another dose of 1" to 2 1/2" of rain this week, and flooding continues to be a concern in the south, especially Missouri and Arkansas. Expectations are for U.S. corn planting progress to be anywhere from 68% to 75% complete as of Sunday compared to the average of 97%. The discussion on prevented planting continues to rage on, with estimates of 6 to 12 million acres thrown out there. Managed money funds have covered all of their once record large net-short of 344,000 contracts, which as of last Tuesday was 22,000 short, but is thought to be a small long of 25,000 contracts to begin Monday. The recent corn rally has destroyed demand for U.S. corn even more. DTN's National Corn Index closed at $4.00 on Friday, with an average basis of 27 cents under July.

Soybeans:

After trading quite a bit higher early Sunday night following Friday's weak response to the threat of tariffs on Mexican imports, soybeans are a couple of cents higher early Monday. Positive statements from China over the weekend regarding continuing trade talks with the U.S., and Mexico's swift response to the threat of tariffs on June 10 has stopped weakness which saw July and November soybeans stall out near the previous highs before plunging on Friday. Unlike in corn, where funds had exited all of their net-short, in soybeans, they remained a significant 122,000 contracts short as of last Tuesday. Although soybeans are also well behind the average seeding pace, soybeans still have a bearish supply situation both in the world and in the U.S., and ideas that soybean acres could still increase up to 1.5 million acres from the March intentions. Expectations are for soy seeding to be 41-43% completed as of Sunday, which would still be well behind average, but in many areas aside from the Eastern Belt, progress should be made in the coming weeks, as both the latest 6-10 day and 8-14 day weather forecasts look to be warmer and drier. There is a general understanding that some 50 to 75 million bushels (mb) of export demand could be slashed from soybeans in the June USDA report insuring a burdensome and record 1-billion bushel (bb) carryout. Bearish is the fact that African swine fever continues to rear its ugly head, with Hong Kong having reported its second case, and swine fever expanding in Vietnam. Trade fears are that ASF could soon show up in South Korea, further dampening demand for U.S. ag products. Look for strong resistance still from $9.00 to $9.15 on July, and $9.20-$9.30 on November to slow down rallies. DTN's National Soybean Index closed at $7.96, and reflects an average basis of 82 cents under July.

Wheat:

All three wheat markets are sharply higher to begin early Monday morning, with Chicago July right at the recent high. The still very wet outlook for Southern Plains hard red winter (HRW) areas, and flooding issues continuing to worsen in Missouri, Illinois, Indiana and Arkansas soft red (SRW) growing regions has funds continuing to cover their once very large short. Managed funds, as of last Tuesday, were just 23,000 short in Chicago and still 40,000 short in Kansas City wheat, but it is likely that funds had covered more of that short on Wednesday and Thursday last week. This week promises another 1" to 2 1/2" of rain in both Oklahoma and Kansas HRW areas, further exacerbating concerns for a loss in both quantity and quality of HRW wheat. Other wheat weather concerns are also creeping into the market, with dryness in parts of North Dakota spring wheat area and Canada, and dryness in the Volga valley in Russia and Ukraine threatening those crops. However, the burdensome U.S. and world wheat stocks, along with the pending U.S. harvest, should certainly cap any upside gains in the near term. Major overhead resistance on Chicago July will be from $5.10-$5.20 on an extended rally. DTN's National HRW index closed at $4.55, and the average basis is at 18 cents under July.

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

FollowDana on Twitter @mantini_r

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